How Open Banking Is Empowering Smaller Firms
Most open banking coverage comes from the big banks and the big fintechs. Catherine Dixon, Chair of The Payment Institutions Association, represents the several hundred smaller firms that rarely get asked.
The economics of open banking already partially work for smaller payment firms, particularly in cross-border money remittance where Pay by Bank is often cheaper than receiving funds by card or Faster Payments. What is holding back broader adoption is software availability, the attitude of banking partners, regulatory concern, and a broader understanding of open banking’s full potential.
These are themes TPIA will be exploring in its open banking webinar on 10 November. Registration and further details are at tpia.org.uk.
Open banking was supposed to open the market up. The argument was that if account access no longer belonged exclusively to the incumbent banks, smaller firms could compete on product and service rather than on balance sheet. Eight years on, that argument is still mostly made by people at large institutions.
Catherine Dixon chairs The Payment Institutions Association, formed at the start of 2025 specifically to represent authorised and registered payment institutions, the API and SPI firms that sit below the tier most trade bodies are built around. There are roughly 800 of them in the UK. We asked Catherine five questions about whether open banking has actually reached them. Her answers follow in full below, submitted in her capacity as Chair and representing the Association’s position rather than a personal view.
The Firms Nobody Was Representing
Before the interview, it is worth establishing the scale of the sector Catherine represents, because it is larger than most coverage of UK payments would suggest.
Figures supplied by TPIA, current as of September 2026. Registration numbers change as firms enter and leave the market, so check the FCA register for the current position.
That is roughly 800 firms. The great majority hold money remittance permissions, and a substantial cluster within the API group is built around cross-border transfer, often serving a single corridor. These are not consumer-facing brands with marketing budgets. They are the plumbing of a specific kind of payment, and their regulatory obligations are broadly the same as those of institutions many hundreds of times their size.
Only around 15% hold an open banking permission. The interesting question is why the other 85% have not moved, and whether that reflects a judgement about open banking or an obstacle in front of it.
Why TPIA Was Formed
QTPIA is still young. What made you realise smaller payment firms needed their own association?
Our Association has been operational since the beginning of 2025. TPIA was established because there was a clear gap in the market: smaller authorised and registered payment institutions did not have a trade body specifically focused on representing their interests. Many are relatively small and they are operating in a market where policy discussions are often dominated by larger firms. Smaller firms face many of the same regulatory expectations but without comparable compliance teams, budgets or access to banking infrastructure.
Yet there are around 380 APIs and 420 SPIs registered (Sep 2026) with the FCA, so there is a clear need for a forum to allow the exchange of information on regulatory and policy development and also to have a voice to the regulator. We reach out to our members through various methods including monthly webinars and an annual conference. We also have a membership price point which is more realistic for smaller firms, so the cost of ‘being at the table’ is not a barrier.
Has Open Banking Levelled the Playing Field?
QOpen banking was sold as a way to level the playing field for smaller players. From where you sit, has it actually done that?
269 (70%) out of 382 APIs have a money remittance permission; 390 (93%) out of 418 SPIs also have money remittance permission. Within the API group, around 120 firms are focused on cross-border money remittance, often on a single corridor (e.g. UK to India). The other 150 firms are more likely to be focused on FX with onward transfer (i.e. a currency exchange with onward transfer of funds to a third party, for which a money remittance permission is required). This tells us that firms have identified significant commercial potential. But technology and integration costs, banking relationships and compliance capacity are preventing firms from realising that potential.
Around 15% of APIs have a permission which will allow them to offer open banking services. But many other PI firms may be partnered with other payment firms who directly hold the relevant permission. For all firms offering cross-border money transfer services (i.e. from the UK out), pay by bank/direct pay solutions are often cheaper than other payment methods by which PI firms may receive the funds for the transfer (i.e. payment by card or by FPS) from their customer.
Open banking business models offer new opportunities for smaller payment firms, but it has not yet fully levelled the playing field. The success test is whether smaller firms can successfully participate.
“Smaller firms face many of the same regulatory expectations but without comparable compliance teams, budgets or access to banking infrastructure.”
Catherine’s answer separates two things that usually get collapsed together. Firms have identified the commercial potential: the permission data shows where they are concentrated, and for cross-border transfer, pay by bank is often cheaper than receiving funds by card or Faster Payments. What stops them acting on it is capacity, in the form of technology and integration costs, banking relationships and compliance resource. A level playing field on paper is not the same as one in practice, and her test is the right one: can smaller firms actually participate?
The composition of the sector matters here. Around 120 API firms are focused on cross-border remittance, frequently on a single corridor, and a further 150 or so on FX with onward transfer. For firms in both groups, the cost of receiving the customer’s money is a direct margin question. Pay by Bank changes that calculation. That it has not translated into widespread adoption points at obstacles rather than indifference.
The Compliance Burden That Scales Badly
QWhat’s a compliance challenge that’s routine for a big bank but genuinely existential for a small firm?
For a smaller payment firm, access to appropriate safeguarding and operational bank accounts can be fundamental to its ability to operate, while the cost of compliance continues to increase.
Financial crime controls must dynamically respond to threats in the market and firms need to be able to carry out an evidenced risk-based approach across a range of scenarios. Firms also need to take a corporate approach to a range of other FCA requirements, especially Consumer Duty, including developing an awareness of vulnerable customers (who may need to be compensated in APP fraud situations). Plus, there is a need to demonstrate operational resilience and to have a wind-down plan if the business is no longer viable. All of this agenda can be a challenge for smaller firms.
At the same time, we are seeing increasingly intensive supervisory scrutiny, including the use of requirements and voluntary undertakings where the FCA identifies concerns.
“Open banking business models offer new opportunities for smaller payment firms, but it has not yet fully levelled the playing field. The success test is whether smaller firms can successfully participate.”
The point about bank accounts deserves emphasis, because it is the one obligation a firm cannot solve through effort. A payment institution needs safeguarding and operational accounts to function. If banks will not provide them, or price them beyond reach, no amount of compliance investment resolves the problem. Catherine’s observation that this does not appear on the regulatory radar is a pointed one.
Where UK Regulation Is Heading After PSD3
QLooking at PSD3 and where regulation is heading, are smaller firms about to have a harder time or an easier one?
UK firms do not fall under scope of PSD3, but HMT is presently consulting on the future of payments regulation. They are proposing that the existing range of payment permissions should remain (in brief: payment account services, card issuance and merchant acquiring services, money remittance, payment initiation services). E-money will be identified as an additional payments permission (i.e. e-money firms as a separate category will disappear). The review is looking to include tokenised payments within the payments space. We notice there is no proposal to do away with the small (registered) payment institution category. We support this.
Overall, the direction of travel brings both opportunities and additional compliance demands, and the key question for smaller firms is whether they have the resources and capacity to meet those increasing opportunities. Some have clearly judged that they cannot, and another interesting metric is the developing market in the sale of PI licences and thus change of control to new owners (often foreign).
“Some have clearly judged that they cannot, and another interesting metric is the developing market in the sale of PI licences and thus change of control to new owners.”
The closing observation is the sharpest in the interview, and Catherine is explicit about the mechanism. Asked whether smaller firms have the resources to meet rising expectations, she notes that some have clearly judged that they cannot, and points to the developing market in the sale of payment institution licences. For those firms, the rational response is not to meet the requirements but to exit. If that pattern holds, consolidation will do quietly what no policy decision announced.
When Advocacy Actually Works
QWhen advocacy actually works, where have you seen a small firm’s problem with the FCA or HMRC get resolved because someone spoke up?
TPIA has been advocating for its members by joining FCA roundtables, where this is possible. We have had some success in working with firms where their annual HMRC MLR registration has not been renewed (apparently for reasons of bureaucratic failure). Subsequently, FCA has taken away the payments permission, as this is conditional on MLR permission being in place. We have lobbied successfully on behalf of firms, so that both the HMRC registration and FCA licence are reinstated and the firm can trade again.
This demonstrates the value of having a collective voice: an individual small firm can find it difficult to get such issues resolved, whereas TPIA can raise them directly with the relevant authorities.
Responses submitted by Catherine Dixon, Chair of TPIA, on behalf of the Association. Views represent the collective opinions of Association members. For more information, contact office@tpia.org.uk.
This is the clearest illustration of why a body like TPIA exists. A registration lapses through administrative failure rather than any conduct issue. Because the FCA payments permission is conditional on the HMRC money laundering registration being in place, the permission falls away too, and the firm cannot trade. For a small operator, that is not a compliance inconvenience. It is the end of the business, arrived at through a paperwork error that nobody intended.
The Editorial Read: What This Means for Smaller Firms
Catherine’s answers describe a sector where the case for open banking is not really in dispute, and the obstacles are practical. That is a more useful diagnosis than the usual framing, which tends to assume smaller firms have not adopted open banking because they have not understood it. Her framing is that they have understood it perfectly well and cannot yet reach it.
Three things follow from that. The first is that cost advantage alone does not drive adoption. If Pay by Bank is already cheaper than the alternatives for cross-border firms and take-up remains at around 15%, the binding constraint is somewhere else, and pointing at the savings again will not move it.
The second is that banking relationships remain the sector’s pinch point, and Catherine puts it more strongly than most would: access to safeguarding and operational accounts can be fundamental to a smaller firm’s ability to operate at all. A firm in that position is not weighing up new payment propositions, whatever their merits.
The third is that capacity, not conviction, is the constraint. Her answer is clear that firms have identified the opportunity and that technology costs, banking relationships and compliance resource are what stand between them and it. That points at a different kind of intervention from the one usually proposed.
We would add one observation from our own side of the market. SSV SmartPay operates at the merchant end of open banking rather than the institutional end, and the pattern we see there is similar in shape. Businesses adopt Pay by Bank when the integration is straightforward and someone can answer their questions, not when the pricing improves by a further few basis points. Technology and integration cost, which sits first on Catherine’s list of barriers, matches what we observe with smaller merchants.
SSV SmartPay is a payments provider, not a trade body or a regulatory adviser. The perspective above is commercial observation, not regulatory guidance, and nothing in this article should be read as advice on a firm’s permissions, safeguarding arrangements or compliance obligations.
Frequently Asked Questions
Has open banking levelled the playing field for smaller payment firms?
Not yet, and not because the opportunity is unclear. Permission data shows firms have identified significant commercial potential, and for cross-border transfer, pay by bank is often cheaper than receiving funds by card or Faster Payments. What prevents firms realising that potential is technology and integration cost, banking relationships and compliance capacity. As TPIA puts it, the success test is whether smaller firms can actually participate.
How many authorised and small payment institutions are there in the UK?
As of September 2026 there are approximately 380 authorised payment institutions (APIs) and 420 small payment institutions (SPIs) registered with the FCA. Around 70% of APIs and 93% of SPIs hold a money remittance permission. Within the API group, roughly 120 firms focus on cross-border money remittance, often on a single corridor such as the UK to India, and around 150 on FX with onward transfer.
What is the TPIA and who does it represent?
The Payment Institutions Association has been operational since the beginning of 2025. It was established because smaller authorised and registered payment institutions had no trade body focused specifically on their interests, in a market where policy discussions are often dominated by larger firms. It provides a forum for exchanging information on regulatory and policy development, a voice to the regulator, monthly webinars and an annual conference, at a membership price point intended to keep the cost of being at the table from becoming a barrier.
What compliance challenges hit smaller payment firms hardest?
Access to appropriate safeguarding and operational bank accounts can be fundamental to a smaller firm’s ability to operate, while the cost of compliance continues to increase. Firms must also maintain financial crime controls that respond dynamically to market threats, meet FCA requirements including Consumer Duty and the identification of vulnerable customers, demonstrate operational resilience and hold a wind-down plan. Supervisory scrutiny is becoming more intensive, including the use of requirements and voluntary undertakings where the FCA identifies concerns.
Does PSD3 apply to UK payment firms?
No. UK firms do not fall under the scope of PSD3. HM Treasury is separately consulting on the future of UK payments regulation and is proposing that the existing range of payment permissions remains, covering payment account services, card issuance and merchant acquiring, money remittance and payment initiation. E-money would become an additional payments permission rather than a separate category, and tokenised payments would be brought within the payments space. There is no proposal to remove the small registered payment institution category.
About this interview
About the guest. Catherine Dixon is Chair of The Payment Institutions Association (TPIA), the UK trade association operational since the beginning of 2025. TPIA was established because smaller authorised and registered payment institutions had no trade body focused specifically on their interests, in a market where policy discussions are often dominated by larger firms. It gives members a forum for exchanging information on regulatory and policy development, a voice to the regulator, monthly webinars and an annual conference, at a membership price point intended to keep the cost of being at the table from becoming a barrier. TPIA engages with the regulator directly, including through FCA roundtables, and has lobbied successfully on behalf of member firms whose HMRC money laundering registrations and FCA permissions were withdrawn following administrative failures. More at tpia.org.uk or office@tpia.org.uk.
Catherine’s answers were supplied in writing on behalf of the Association and have been lightly copy-edited for grammar, punctuation and house style without changing their meaning. Views expressed are those of TPIA and represent the collective opinions of Association members, not those of SSV SmartPay. Commentary sections marked “SSV SmartPay perspective” and “The Editorial Read” are our own. Editorial context and source links were reviewed on 22 September 2026. Figures supplied by TPIA are current as of September 2026 and should be checked against the FCA Financial Services Register immediately before publication.
This is the second edition of Expert Voices, the guest series in our LinkedIn newsletter Open Banking Insider. The first featured Ellie Duncan, author of Open Banking and Financial Inclusion.
Interview conducted and edited by Liliia Liehkova, Digital Marketing and Social Media Lead at SSV SmartPay Ltd.
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References
- The Payment Institutions Association (TPIA). Available at: https://www.tpia.org.uk/
- Financial Conduct Authority. Financial Services Register. Source for payment institution registration numbers. Available at: https://register.fca.org.uk/
- Financial Conduct Authority. Consumer Duty. Available at: https://www.fca.org.uk/firms/consumer-duty
- Financial Conduct Authority. Safeguarding: changes to the client assets sourcebook (CASS). Available at: https://www.fca.org.uk/firms/payment-services-electronic-money/safeguarding
- HM Treasury. Payments regulation consultation. Available at: https://www.gov.uk/government/organisations/hm-treasury
- HMRC. Money laundering supervision registration. Available at: https://www.gov.uk/guidance/money-laundering-regulations-registration
Important information
Figures. Registration numbers, permission percentages and firm counts were supplied by TPIA and are current as of September 2026. These figures change as firms enter and leave the market. Consult the FCA Financial Services Register for the current position.
Not regulatory, legal or financial advice. This article is general commentary for a professional audience. It does not constitute regulatory, legal, compliance or financial advice, and should not be relied upon in relation to any firm’s permissions, safeguarding arrangements, registration status or compliance obligations. Firms should take their own professional advice.
SSV SmartPay terms. Full pricing, terms and conditions are available at ssvsmartpay.co/our-pricing. SSV SmartPay Limited is registered in England and Wales (CRN 15424021). SSV SmartPay is not directly FCA-regulated; payment initiation services are provided by FCA-authorised Payment Institution partners.
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Has open banking levelled the playing field for smaller payment firms?
Not yet, and not because the opportunity is unclear. Permission data shows firms have identified significant commercial potential, and for cross-border transfer, pay by bank is often cheaper than receiving funds by card or Faster Payments. What prevents firms realising that potential is technology and integration cost, banking relationships and compliance capacity. As TPIA puts it, the success test is whether smaller firms can actually participate.
How many authorised and small payment institutions are there in the UK?
As of September 2026 there are approximately 380 authorised payment institutions (APIs) and 420 small payment institutions (SPIs) registered with the FCA. Around 70% of APIs and 93% of SPIs hold a money remittance permission. Within the API group, roughly 120 firms focus on cross-border money remittance, often on a single corridor such as the UK to India, and around 150 on FX with onward transfer.
What is the TPIA and who does it represent?
The Payment Institutions Association has been operational since the beginning of 2025. It was established because smaller authorised and registered payment institutions had no trade body focused specifically on their interests, in a market where policy discussions are often dominated by larger firms. It provides a forum for exchanging information on regulatory and policy development, a voice to the regulator, monthly webinars and an annual conference, at a membership price point intended to keep the cost of being at the table from becoming a barrier.
What compliance challenges hit smaller payment firms hardest?
Access to appropriate safeguarding and operational bank accounts can be fundamental to a smaller firm’s ability to operate, while the cost of compliance continues to increase. Firms must also maintain financial crime controls that respond dynamically to market threats, meet FCA requirements including Consumer Duty and the identification of vulnerable customers, demonstrate operational resilience and hold a wind-down plan. Supervisory scrutiny is becoming more intensive, including the use of requirements and voluntary undertakings where the FCA identifies concerns.
Does PSD3 apply to UK payment firms?
No. UK firms do not fall under the scope of PSD3. HM Treasury is separately consulting on the future of UK payments regulation and is proposing that the existing range of payment permissions remains, covering payment account services, card issuance and merchant acquiring, money remittance and payment initiation. E-money would become an additional payments permission rather than a separate category, and tokenised payments would be brought within the payments space. There is no proposal to remove the small registered payment institution category.
