As the digital commerce landscape evolves, payment processing has become one of the most critical choices for online store owners.
Two major paths now exist:
- Traditional payment gateways , like PayPal or Stripe
- Open banking solutions , powered by APIs and regulated financial institutions
But which is truly better for your eCommerce store — especially when it comes to conversion rates, security, fees, and customer experience ?
This article explores:
- The differences between open banking and traditional gateways
- The pros and cons of each approach
- How regional compliance and user behavior affect performance
- Real-world use cases for Shopify, WooCommerce, and BigCommerce stores
Let’s dive in.
Understanding the Core Differences
Before comparing the two, let’s define what we’re talking about:
Traditional Payment Gateways
These are third-party services that facilitate online payments by acting as an intermediary between your store and the customer’s bank.
Examples:
- PayPal
- Stripe
- Authorize.Net
- Square
They typically involve redirecting customers to a secure external page to complete transactions.
Open Banking
Open banking allows businesses and apps to access financial data (with permission) via secure APIs. It enables direct bank-to-bank transfers without intermediaries.
It’s regulated in many regions under laws like:
- PSD2 (Europe)
- UK Open Banking Standard
- Open Banking in Australia and Canada
Therefore, open banking isn’t just a payment method — it’s a data-sharing ecosystem designed to enhance transparency and efficiency.
Why This Choice Matters for eCommerce Sellers
Choosing between open banking and traditional gateways affects:
- Checkout speed
- Customer trust
- Transaction costs
- Conversion rates
- Data ownership and insights
The right choice depends on your:
- Target audience
- Regional market
- Business model
- Risk tolerance
So let’s compare both options side-by-side.
Open Banking vs Traditional Gateways: A Detailed Breakdown
| Feature | Traditional Payment Gateway | Open Banking |
|---|---|---|
| Payment Flow | Redirect or embedded checkout | Direct bank transfer |
| Fees | 2.9% + $0.30 per transaction (varies) | Typically lower than gateways |
| Speed | 1–3 seconds | Instant settlement possible |
| Security | Strong encryption, fraud detection | Bank-grade security, real-time verification |
| User Experience | Familiar interface for many users | Seamless if integrated well |
| Chargeback Protection | Yes, through gateway | Limited — but fewer disputes with direct transfers |
| Integration Complexity | Easy setup with plugins | Requires API integration |
| Regulatory Compliance | PCI DSS, KYC, etc. | PSD2, GDPR, Open Banking Standard |
| Customer Trust | High brand recognition (PayPal, Stripe) | Varies by region and familiarity |
Ultimately, traditional gateways offer simplicity and broad acceptance , while open banking offers faster, cheaper, and more transparent transactions — but requires greater technical expertise and consumer education.
Pros and Cons of Each Option Traditional Payment Gateways – Pros
- Widely recognized and trusted
- Easy to set up with minimal tech knowledge
- Supports multiple payment types (credit cards, ACH, e-wallets)
- Built-in fraud protection and dispute resolution
- Global reach across platforms and currencies
Traditional Payment Gateways – Cons
- Higher transaction fees
- Checkout friction due to redirects
- Limited financial data sharing
- Delayed settlements (1–3 business days)
- Less control over payment flow
Open Banking – Pros
- Lower transaction costs
- Instant settlements
- Direct bank-to-bank transfers = fewer failed payments
- Richer customer insights (spending patterns, income verification)
- Fewer chargebacks due to finality of bank transfers
Open Banking – Cons
- Requires strong API integration
- Less familiar to average shoppers
- Regional limitations (availability varies)
- Need for user consent and ongoing regulation adherence
- May not support all currencies or global buyers
Therefore, the decision hinges on your business needs, customer base, and long-term scalability goals .
Regional Considerations: Where Does Open Banking Work Best?
Open banking is not yet universal. Its adoption depends heavily on geographic location and local regulations .
Europe & UK: Leading the Way
With PSD2 and the UK’s Open Banking Initiative , European markets have seen rapid adoption.
“In 2024, over 60% of UK fintech companies offered open banking integrations.”
If you’re targeting European or UK customers , open banking is a viable and often preferred option.
North America: Still Emerging
The U.S. and Canada do not yet have a unified open banking framework like Europe.
However, initiatives like FinCEN’s data-sharing rules and bank-led APIs from Chase, Wells Fargo, and Plaid are laying the groundwork.
For now, traditional gateways remain dominant — but early adopters can gain a competitive edge with open banking integrations.
Asia-Pacific: Mixed Adoption
Australia and Singapore lead in open banking adoption, with government-backed frameworks in place.
Other countries like India (UPI system) and Japan (Fintech-friendly banks) are also embracing similar principles — though not always under the term “open banking.”
As a result, market-specific strategies are essential when expanding globally.
Use Cases: When to Choose Which?
There’s no one-size-fits-all answer. Here are common scenarios where each shines:
Choose Traditional Gateways If:
- You sell globally and need multi-currency support
- You prioritize easy setup and recognizable payment options
- Your customers prefer card-based payments
- You run a small or medium-sized store and want plug-and-play solutions
- You don’t want to manage complex API integrations
Choose Open Banking If:
- You operate in Europe, UK, or Australia
- You want to reduce transaction fees and payment failures
- You’re building a financial product or B2B platform
- You want deeper financial insights into your customers
- You value faster settlements and reduced fraud risk
Likewise, some stores use a hybrid model , offering both open banking and traditional gateways to maximize conversion and flexibility.
Psychological and Behavioral Factors That Influence Conversion
How customers perceive a payment method affects whether they’ll complete a purchase.
Here’s how the psychology plays out:
Traditional Gateways:
- Recognizable logos increase trust
- Card entry feels familiar and fast
- Users expect minor fees or delays
- Redirects feel safe because they’re expected
Open Banking:
- New technology may cause hesitation
- Bank login feels secure to educated users
- No card details required = less mental load
- Younger audiences prefer seamless flows
- Older audiences may distrust unfamiliar methods
Therefore, customer demographics and regional habits should guide your payment strategy .
Performance Comparison: Speed, Cost, and User Behavior
| Metric | Traditional Gateways | Open Banking |
|---|---|---|
| Average Checkout Time | 8–15 seconds | 3–7 seconds |
| Average Transaction Fee | 2.9% + $0.30 | ~1.5% or less |
| Failed Transactions | 3–5% | <1% |
| Chargeback Rate | 0.5–2% | <0.1% |
| Settlement Time | 1–3 business days | Same-day or instant |
| Customer Data Access | Limited to transaction history | Deeper insights available (with consent) |
As shown above, open banking wins in cost and speed , while traditional gateways win in familiarity and global reach .
Integration Options for Major eCommerce Platforms
Depending on your store platform, the integration process differs.
Shopify Users:
- Traditional : Use native Stripe or PayPal integration
- Open Banking : Use third-party providers like TrueLayer, Yapily, or Token.io (via custom app development)
WooCommerce:
- Traditional : Install Stripe or PayPal plugin
- Open Banking : Use plugins like Yapily for WooCommerce or TrueLayer Connect
BigCommerce:
- Traditional : Native Stripe, PayPal, and Braintree support
- Open Banking : Available through API integrations and fintech partners
Additionally, platforms like Shopify Balance and Stripe Treasury are blurring the line between open banking and traditional gateways — suggesting a future where both coexist seamlessly.
How to Decide: Key Questions to Ask
Before choosing a payment solution, ask yourself:
1. Where Are My Customers Located?
If most of your sales come from Europe or Australia, open banking makes sense. In the U.S., stick with gateways unless you’re targeting early adopters.
2. What Kind of Products Do I Sell?
High-ticket items benefit from open banking’s low fees and instant transfers . For impulse buys, gateways with saved cards perform better .
3. Do I Have Technical Resources?
Open banking often requires custom development or partner integrations. Gateways usually offer one-click setup .
4. How Important Is Financial Data to My Business?
If you’re building a lending, budgeting, or subscription service , open banking gives you richer insights.
5. Am I Optimizing for Cost or Convenience?
Open banking reduces fees and increases conversion rates. But gateways offer broader accessibility and ease of use.
Therefore, align your payment strategy with your business goals and customer expectations .
Tools That Support Open Banking Integration
Here are leading tools and platforms helping eCommerce sellers adopt open banking:
| Tool | Features | Region |
|---|---|---|
| TrueLayer | API-based payments, identity verification | EU, UK, Australia |
| Yapily | Secure bank connections, recurring payments | EU, UK |
| Token.io | Instant payments, PSD2-compliant | EU, UK |
| GoCardless | Direct debit via open banking | UK, EU |
| Modulr | Embedded finance and open banking | UK, Europe |
| RapidAPI (Open Banking) | Aggregated open banking APIs | Global |
These tools help bridge the gap between bank-level security and merchant convenience — making open banking increasingly accessible to non-tech teams.
Frequently Asked Questions
Q: What is open banking?
A: Open banking lets third-party providers access financial data securely via APIs — enabling direct bank transfers and richer financial insights.
Q: Is open banking safer than traditional gateways?
A: Yes, in many ways. Since transactions are authorized through your bank, there’s no card data to steal or phish.
Q: Can I use open banking outside Europe?
A: Limited availability. While the U.S. doesn’t have a formal open banking law, some banks offer APIs. Australia and Singapore are adopting open banking standards rapidly.
Q: Will open banking replace traditional gateways?
A: Not entirely — but it will complement them. Many stores already offer both to cater to different customer preferences.
Q: Do customers trust open banking?
A: Trust is growing — especially among younger generations who value transparency and avoid card fees.
Final Thoughts: The Future of eCommerce Payments
The shift toward open banking is more than a trend — it’s a fundamental change in how money moves online.
For eCommerce store owners , this means new opportunities to:
- Reduce costs
- Improve conversions
- Enhance financial understanding of your buyers
While traditional gateways still dominate the global market, open banking is gaining traction — especially in regions where regulation supports it.
So ask yourself:
“Am I ready to embrace the future of payments — or am I comfortable sticking with the known?”
Because whichever you choose today will shape your store’s **growth, profitability, and customer satisfaction tomorrow.
