Series 2 — Prescription · Paper 3
Commercial Coherence: How the Scheme Sustains Itself
A payment scheme that cannot sustain itself commercially will not survive long enough to matter. Good intentions, elegant architecture, and sound governance are necessary conditions for a scheme worth joining — but they are not sufficient. The commercial model has to work: for the scheme itself, for the operators who build on it, for the merchants who accept it, and for the payers who use it. If any of those participants lacks a rational reason to join and stay, the scheme fails regardless of its technical or governance merits.
This paper examines the commercial architecture of an open payment scheme — not as a revenue projection or a business plan, but as a coherence test. Does every participant have a rational interest in the scheme’s success? Do the incentives point in the right direction at every level? And does the model hold together without any participant needing to extract disproportionate value at the expense of others?
The answer, as this paper will argue, is yes — and the reason it is yes is structural rather than coincidental. An open scheme creates commercial coherence precisely because it separates the governance function from the commercial function, and aligns the commercial function with the interests of the participants it serves.
The Scheme Authority: independence as a commercial model
The Scheme Authority occupies an unusual position in the scheme’s commercial architecture. It is the most important entity in the scheme — without it, there are no rules, no trust infrastructure, no dispute arbitration, and no network worth joining — and yet it is the entity with the least direct commercial stake in the scheme’s payment flows.
This is not an accident. It is the design.
The SA’s revenue comes from membership fees paid by licensed PISPs. The fee is the same regardless of how many transactions a PISP processes, which merchants it serves, or how disputes are resolved. The SA has no financial interest in transaction volume, no stake in dispute outcomes, and no reason to favour one PISP over another. Its revenue is stable, predictable, and entirely independent of the commercial dynamics it governs.
This structure answers the question that any serious participant will ask about a governance body: what stops it from being captured by the most powerful participants, or from using its position to extract value from the network it oversees? The answer is that it cannot — because its commercial model gives it no mechanism to do so. A percentage-of-transactions model would create exactly the wrong incentives: an SA that profits from volume has an interest in rules that maximise volume rather than rules that are fair. A membership fee model creates an SA whose interest is in maintaining a healthy network of compliant, well-governed PISPs — which is exactly the interest it should have.
The membership fee is also a commitment threshold. A PISP that pays a meaningful annual fee to be a scheme member has made a considered commercial decision. It has accepted the scheme rules as a condition of participation. It has a financial and reputational stake in the scheme’s success. That is a different quality of participant from one who joins a free network with nothing to lose from bad behaviour.
The SA’s commercial model is, in this sense, the foundation on which everything else rests. A governance body that is financially sustainable, structurally independent, and incentivised to grow a healthy network is the precondition for a scheme worth participating in.
The PISP: competing on merit
A PISP — Payment Initiation Service Provider — is the commercial operator that sits between the scheme and the market. It onboards merchants, serves payers, processes payments, and handles disputes at Stage 2. It is an FCA-regulated entity that has accepted the scheme rules as a condition of membership and agreed to enforce SA decisions regardless of their commercial consequence.
What the scheme does not mandate is how a PISP structures its commercial relationship with merchants. That is entirely the PISP’s decision — and deliberately so. One PISP might charge a flat per-transaction fee. Another might offer a monthly platform fee with no per-transaction cost. Another might bundle payment services into a broader SaaS offering tailored to a specific vertical. Another might offer percentage-based pricing to merchant categories where that model makes commercial sense. The scheme sets the rules of participation. It does not set the price of it.
This freedom is not a gap in the scheme’s design. It is the point. The competitive dynamic between PISPs — competing on pricing model, on platform quality, on dispute handling speed, on merchant tooling, on vertical specialisation — is what makes the scheme genuinely open rather than just technically open. A merchant who dislikes their PISP’s commercial terms can move to another PISP without changing their integration. The protocol is the same. The switching cost is low. The competition that results is the mechanism that keeps pricing honest and service quality high across the network.
This is structurally different from what the card networks offer. On a card network, a merchant switching acquirers still operates within the same scheme rules, pays fees set within the same interchange framework, and has no meaningful ability to influence the commercial terms that govern the most consequential part of the relationship. The competition between acquirers on a card network is real but constrained — constrained by the network’s own commercial interests sitting above it.
On an open scheme, there is no commercial interest sitting above the PISP layer. The SA sets governance rules, not commercial terms. PISPs compete on the full range of commercial variables — not just price, but model, service, and specialisation. A PISP that finds a better way to serve hospitality merchants, or professional services firms, or subscription businesses, captures that market through merit rather than through integration lock-in. And a PISP that uses the protocol’s richer consent model to offer capabilities the card network cannot — handling bar tabs, conditional payments, payer-controlled recurring authorisations — creates commercial differentiation that has nothing to do with price.
For a new PISP considering whether to join the scheme, the commercial question is similarly open: what merchant segment can we serve better than existing alternatives, and what commercial model best fits that segment? The scheme provides the infrastructure — the trust framework, the dispute mechanism, the scheme rules — that makes any credible answer to that question viable. The PISP does not need to build those things from scratch. It implements them, and competes on everything else.
The merchant: a different kind of payment relationship
A merchant joining the scheme is making a commercial decision that goes beyond the fee comparison. The fee comparison may well be material — depending on the commercial model their PISP offers, the cost of processing payments on an open scheme can be significantly lower than card network fees at meaningful volume — but the fee alone is not the complete argument.
The more significant change is in the nature of the relationship between the merchant and their payment provider.
On a card network, the merchant’s relationship with their payment provider is defined by the provider’s terms, enforced by the provider’s infrastructure, and subject to the provider’s commercial decisions about pricing, dispute handling, and account management. The merchant accepted those terms as a condition of accessing the network. Switching providers means switching networks — a significant technical and commercial undertaking that most merchants avoid even when they are dissatisfied.
On an open scheme, the merchant’s relationship with their PISP is still a commercial relationship with defined terms. But the underlying scheme rules are set by the SA, not by the PISP. The dispute mechanism is governed by scheme rules that the PISP cannot unilaterally change. The merchant’s integration is to the scheme, not to the PISP — switching PISPs is a commercial decision, not a technical migration. The merchant retains a degree of sovereignty over their payment infrastructure that the card network model does not allow.
This is a structural change in the merchant’s commercial position, not just a pricing change. A merchant on an open scheme is a participant in a governed network, not a customer of a proprietary one. The distinction matters when fees are renegotiated, when disputes arise, and when the merchant’s business grows to the point where their payment costs become a significant operational concern.
The payer: participation without exploitation
The payer’s relationship with the scheme is different in kind from every other participant’s. A payer is not a commercial entity that has chosen to join a network for commercial reasons. They are a consumer whose participation is the precondition for the scheme having any value at all — without payers, there are no payments, and without payments, there is no scheme.
This asymmetry has a commercial implication that is easy to overlook: the scheme’s commercial model must never depend on extracting value from payers. The moment it does — through data monetisation, through exploiting the trust placed in the payment infrastructure, through making payer behaviour a commercial asset — the scheme has become indistinguishable from the system it was designed to replace.
The open scheme’s commercial model avoids this by design. The SA’s revenue comes from PISPs, not from payers. The PISP’s revenue comes from merchants, not from payers. The payer pays nothing directly for using the scheme. Their data is governed by the protocol’s consent model — defined in the published specification, not in a proprietary policy document written by a party with a commercial interest in expanding its scope.
This is not altruism. It is commercial logic. A scheme that payers trust is a scheme that merchants want to accept. A scheme that merchants accept is a scheme that PISPs can build sustainable businesses on. A scheme that PISPs build on is a scheme that generates membership fee revenue for the SA. The payer’s trust is the foundation of the entire commercial architecture — which means protecting it is not a cost. It is the thing that makes the commercial model viable.
Why the incentives align
The test of commercial coherence is not whether each participant benefits individually — in most commercial arrangements, each party believes it benefits, at least initially. The test is whether the incentives point in the same direction: whether what is good for one participant is also good for the others, and whether the scheme’s success creates value for all of them rather than redistributing it between them.
In a proprietary payment network, this test is difficult to pass. The network operator profits from transaction volume, which is also what merchants and payers generate. The operator’s interest in maximising revenue from that volume creates a structural tension with the merchants’ interest in minimising fees and the payers’ interest in not being commercially exploited. The network’s success comes partly at the expense of its participants.
In an open scheme, the structure is different. The SA profits from a healthy network of compliant PISPs — which means its interest is in scheme integrity, not in extracting margin from transactions. Each PISP profits from merchant volume — which means its interest is in serving merchants well, not in locking them in. Merchants benefit from competition between PISPs — which means the scheme’s openness is directly in their commercial interest. And payers benefit from a scheme whose commercial model has no mechanism to exploit them.
Every participant’s rational interest points toward the scheme’s health and growth. That is not a coincidence of good intentions. It is a consequence of the architecture — of separating governance from commerce, of making the protocol open, and of building a commercial model that generates value by serving participants well rather than by controlling them.
The question of new participants
A scheme that is coherent with three participants — an SA, one PISP, and a small number of merchants — faces a different question at scale: does the commercial logic hold when there are ten PISPs, a hundred merchants, and a hundred thousand payers?
The answer is that it holds better, not worse. Each new PISP that joins the scheme adds merchants and payers. Each new merchant makes the scheme more useful to existing payers. Each new payer makes the scheme more attractive to new merchants. These are network effects — the same dynamics that made card networks dominant — and they work in favour of every participant, not just the network operator.
For an existing PISP, a new PISP joining is not purely a competitive threat. It is also an expansion of the network that makes the scheme more valuable to the merchants the existing PISP serves. A merchant who knows that their customers can pay regardless of which PISP those customers use is a merchant who has a stronger reason to accept the scheme. That is good for every PISP in the network, including the ones who compete with the new entrant.
This is the characteristic of open networks that closed networks cannot replicate: new participants strengthen the network for everyone, rather than threatening the position of those already in it. It is also the characteristic that makes the scheme’s long-term commercial trajectory fundamentally different from that of a proprietary network — where growth eventually produces concentration, rent-seeking, and the structural misalignment between operator and participant that this series of papers has examined at length.
An open scheme grows differently. Its commercial coherence does not erode as it scales. It compounds.
Thomas Larsen is a cloud platform architect and engineering leader with twenty years’ experience building open infrastructure for public-sector and defence organisations. He is currently working on an open payment scheme for the UK market.