Pay by bank
What is pay by bank?
Pay by bank is a payment method that moves money directly from a customer's bank account to a merchant's account, authorized through rather than a card network. The customer confirms the transfer inside their own banking app or a bank-hosted redirect page, and the bank sends the funds using an account-to-account rail instead of a card scheme.
Key facts
- Runs on open banking APIs, which give a licensed third party read or initiate access to a bank account with the customer's consent.
- Moves funds account-to-account, bypassing card networks like Visa and Mastercard entirely.
- Confirmation happens inside the customer's own banking app or a bank-hosted redirect page, not a card entry form.
- Regulated under frameworks such as PSD2 in the EU and UK, and comparable open banking rules elsewhere, which set consent and liability requirements.
- Related to and , but the customer authorizes each transfer at checkout rather than granting a standing mandate.
How it works
- At checkout, the customer selects pay by bank instead of a card or wallet.
- The merchant's payment provider redirects the customer to their own bank's login screen, or opens the flow inside the customer's banking app.
- The customer authenticates with their bank credentials and reviews the payment amount and merchant name.
- The customer authorizes the transfer, which satisfies strong customer authentication under most open banking regulations.
- The bank initiates an account-to-account transfer for the exact amount, and the payment provider receives confirmation that the customer authorized it.
- Funds settle to the merchant according to the underlying transfer rail's own settlement schedule, which varies by country and banking network.
Why it matters
- Removing card entry removes an entire class of card-not-present fraud, since there's no card number, expiry date, or CVV to steal or replay.
- Because the customer authenticates directly with their own bank rather than a card issuer, liability for a disputed payment follows the open banking framework and the specific rail used, not standard card scheme chargeback rules.
- Pay by bank skips card network fees, so providers typically price it differently from card transactions, though the exact fee structure varies by provider and market.
- Once a customer authorizes an account-to-account transfer, it generally can't be pulled back the way a card chargeback reverses a card payment, which changes how merchants and customers handle refunds and disputes.
Common issues
- If the customer closes the banking app or browser tab before finishing authorization, the payment provider only sees an abandoned session, not a specific decline reason.
- An outage or maintenance window on the customer's own banking app blocks the redirect entirely, unlike a card payment that can fall back to a different issuer path.
- Confirmation timing depends on the receiving bank's own systems, so a payment may show as pending for longer than a typical card authorization.
- Not every bank supports every open banking provider, and availability varies by the customer's own bank and country.
