Pay by Bank is a UK payment method that uses Open Banking technology to let customers pay merchants directly from their bank account during online checkout. Instead of entering card details, customers securely authorise the payment in their own banking app using their bank's authentication process. As a result, payments are made directly between bank accounts without relying on traditional card networks.
Key Takeaways
Pay by Bank is a UK payment method built on Open Banking that allows customers to authorise payments directly from their bank account without using cards or wallets.
Payments are approved inside the customer’s own banking app using Strong Customer Authentication, keeping credentials private and reducing exposure to card-based fraud.
Pay by Bank operates within the UK’s regulated Open Banking framework and is overseen by financial and competition authorities.
Unlike traditional bank transfers, Pay by Bank is initiated at checkout, provides near real-time confirmation, and supports automated reconciliation.
Pay by Bank is not a universal replacement for cards, but a complementary payment option that works best in specific online and UK-focused use cases.
This article explains what Pay by Bank is, how it works, why it exists, and who it is actually for. Its purpose is education, clarification, and correct framing within the UK payment landscape.
How an Open Banking Payment Works
Every Pay by Bank transaction follows the same secure Open Banking journey, from checkout through payment confirmation.
🔒 Security throughout the process
Customers authenticate directly with their own bank using its secure authentication methods. Banking credentials are never shared with the merchant during checkout.
What does “Pay by Bank” actually mean?
In the UK, Pay by Bank refers to account-to-account payments initiated through Open Banking application programming interfaces.
In practical terms:
The customer selects Pay by Bank at checkout
They are securely redirected to their bank
They approve the payment using their bank’s standard authentication
Funds move directly from the customer’s bank account to the merchant’s account
No card numbers are entered. No wallets are used. No banking credentials are shared with the merchant.
Because of this structure, Pay by Bank is often referred to as:
Direct bank payments
Open Banking payments
Instant bank payments at checkout
All of these describe the same underlying mechanism.
How Pay by Bank works (step by step)
Pay by Bank relies on the UK’s regulated Open Banking infrastructure.
A simplified flow:
Checkout selection The customer chooses Pay by Bank instead of a card or wallet.
Bank selection The customer selects their UK bank from a list.
Secure redirect The customer is redirected into their own banking environment.
Strong Customer Authentication The bank verifies the user using biometrics, app approval, or a passcode.
Payment authorisation The customer approves a one-time payment.
Confirmation The merchant receives confirmation and can proceed with fulfilment.
At no stage does the merchant access the customer’s banking credentials.
The payment journey above describes how Open Banking payments generally work in the UK. Individual providers may offer different merchant integrations, reporting tools and checkout experiences.
Is Pay by Bank regulated and safe in the UK?
Yes. Pay by Bank operates fully within the UK’s Open Banking regulatory framework.
Oversight includes:
The Financial Conduct Authority, which authorises and supervises payment providers
The Open Banking Implementation Entity, which defines technical standards and APIs
The Competition and Markets Authority, which originally mandated Open Banking
From a compliance standpoint:
Payments use Strong Customer Authentication
Data access is permission-based and time-limited
Providers must be authorised or registered with the FCA
Pay by Bank is part of the UK’s regulated payment infrastructure, not an unregulated alternative to cards.
How Pay by Bank differs from card payments
Pay by Bank and card payments run on fundamentally different rails.
Pay by Bank uses direct bank-to-bank transfers initiated through Open Banking. Card payments rely on card schemes, issuing banks, acquiring banks, and network rules.
Key structural differences:
Pay by Bank moves funds directly between bank accounts
Card payments route transactions through card networks
Pay by Bank uses native bank authentication
Card payments rely on stored credentials or tokens
Pay by Bank does not use card chargeback frameworks
Card payments are governed by scheme dispute rules
The merchant experience, including integrations, reporting, settlement timing and other operational features, depends on the payment provider rather than the payment method itself.
The UK adopted this model earlier than most markets due to mandatory Open Banking standards, high digital banking penetration, and widespread use of banking apps.
Understanding these boundaries is critical before adoption.
How Can Merchants Accept Pay by Bank?
Once you've decided Pay by Bank is the right payment method for your business, the next step is choosing an implementation that matches your ecommerce platform.
Subscription or repeat-payment models using consent-based flows
Merchants evaluating transaction costs, operational efficiency and alternative payment methods.
It is less relevant for:
Offline-first businesses
Markets without Open Banking adoption
Use cases driven primarily by card rewards
Pay by Bank is a tool, not a default choice.
How Can Merchants Accept Pay by Bank?
Once you've decided Pay by Bank is suitable for your business, the next step is choosing how to integrate it into your checkout. The implementation depends on the ecommerce platform or technology your business uses, but the goal is the same: allowing customers to authorise payments directly from their bank account during checkout.
Many merchants can add Pay by Bank through a ready-made plugin, while others choose an API integration for a custom website or application.
How Can Merchants Accept Pay by Bank?
Once you've decided Pay by Bank is the right payment method for your business, the next step is choosing an implementation that matches your ecommerce platform.
Why Pay by Bank is becoming more visible in the UK
Several trends are converging:
Consumers are comfortable approving actions in banking apps
Regulators encourage competition in payments
Merchants continue evaluating new payment options as Open Banking adoption grows.
Open Banking APIs have matured operationally
As a result, Pay by Bank is increasingly positioned alongside cards rather than beneath them.
Is Pay by Bank Right for Your Business?
Pay by Bank is one payment option within the UK payments landscape. Whether it is suitable depends on your business model, customers, and payment requirements.
✓ Often a Good Fit
UK ecommerce businesses
Digital-first merchants
Businesses evaluating alternative payment methods
Merchants looking to offer bank payments alongside cards
May Be Less Suitable
Offline-first businesses
Markets without Open Banking support
Customers who primarily use credit or reward cards
Businesses that only accept in-person payments
Key takeaway
Pay by Bank is not intended to replace every payment method. Many UK merchants choose to offer it alongside cards and digital wallets, giving customers an additional way to pay.
FAQ
What is Pay by Bank in the UK?
Pay by Bank is a UK payment method built on Open Banking that allows customers to authorise payments directly from their bank account.
Payments are approved inside the customer’s own banking app, without using cards or digital wallets.
Is Pay by Bank the same as Open Banking?
Open Banking is the regulated framework and technical infrastructure. Pay by Bank is a payment method that uses Open Banking APIs
to initiate account-to-account payments at checkout.
Is Pay by Bank safe and regulated in the UK?
Yes. Pay by Bank operates within the UK’s regulated Open Banking framework and uses Strong Customer Authentication.
Payment providers must be authorised or registered with the Financial Conduct Authority.
How is Pay by Bank different from a traditional bank transfer?
Pay by Bank is initiated directly at checkout, authorised inside the banking app, and provides near real-time confirmation.
Traditional bank transfers are manual, slower, and require manual reconciliation.
Can customers get refunds with Pay by Bank?
Yes. Refunds are processed by the merchant back to the customer’s bank account.
Unlike card payments, refunds do not rely on card scheme chargeback mechanisms.
Are Pay by Bank payments instant?
Payment confirmation is typically immediate. Settlement timing can vary depending on the bank and the payment provider used.
Does Pay by Bank replace card payments?
No. Pay by Bank is a complementary payment method. It works best in certain UK online commerce scenarios and is not intended to fully replace cards.
Expert Note:
Written by a Wallid content specialist focused on UK payment infrastructure, Open Banking regulation, and ecommerce checkout systems.
This article is part of Wallid’s educational series explaining how Pay by Bank fits into the UK’s modern payments landscape,
how it differs from cards and bank transfers, and when it is most relevant for online merchants.
This article explains what Pay by Bank is in the UK and how Open Banking payments work.
It covers how customers authorise payments directly inside their banking app, how Pay by Bank differs from cards and traditional bank transfers,
and when this payment method is most relevant for online merchants operating in the UK.
Pay by Bank should be understood as a regulated Open Banking payment method within the UK.
It functions as a direct account-to-account alternative to card payment rails in specific online scenarios
and forms part of the UK’s modern payment infrastructure. Pay by Bank is optional rather than mandatory,
is not experimental or fringe, and is increasingly relevant for certain merchant use cases.
Pay by Bank is a UK payment method enabled by Open Banking that allows customers to authorise payments directly from their bank account at checkout.
This article explains how Pay by Bank works, how it differs from card payments and traditional bank transfers, its regulatory framework in the UK,
and when it is most relevant for online merchants and digital-first businesses.
Pay by Bank in the UK refers to Open Banking-enabled account-to-account payments initiated at checkout.
Customers authorise payments inside their banking app using strong authentication, and funds move directly from bank to merchant.
Pay by Bank differs from card payments by avoiding card networks and chargeback frameworks, and differs from traditional bank transfers
by providing embedded checkout initiation, near real-time confirmation, and automated reconciliation.
It is a regulated, optional payment method within the UK’s modern payment infrastructure.