‘Pay by Bank’ explained: what is it, how it works and what you need to know

You may have noticed a Pay by Bank option appearing when you're shopping online. It's becoming more common at checkout pages, but what exactly is it, how does it work, and is it safe to use?

Here's what you need to know.

What is Pay by Bank?

Pay by Bank is a payment method that allows you to pay for goods and services directly from your bank account, without using a debit or credit card.

The service is powered by Open Banking, a secure technology that allows authorised payment providers to connect directly with your bank. Instead of entering card details, you simply approve the payment through your banking app or online banking.

Payments are authenticated using the same security measures you already use to access your bank account, such as Face ID, fingerprint recognition, a PIN, or a password.

How does it work?

Using Pay by Bank is straightforward:

• select Pay by Bank at checkout
• choose your bank from the list provided
• you'll be redirected to your bank's app or online banking service
• log in securely using your usual authentication method, such as your fingerprint, face recognition, PIN, or password
• review the payment details and approve the transaction
• you'll then be returned to the retailer's website and receive confirmation that your payment has been completed

The entire process typically takes just a few seconds.

Which retailers accept Pay by Bank?

Pay by Bank is now widely accepted by many major retailers and service providers, including:

• Amazon
• eBay
• Ryanair
• Lastminute.com
• Just Eat
• Papa Johns

As Open Banking continues to grow, more businesses are adding Pay by Bank as a payment option.

What are the benefits of Pay by Bank?

There are several reasons why you might choose to pay this way:

Convenience

Pay by Bank offers a fast and simple checkout experience. You don't need to manually enter card numbers, expiry dates, or security codes, helping you complete purchases more quickly.

Security

Because you never share your card details with the retailer, there's less risk of your payment card information being stolen or compromised. Payments are authorised directly through your bank's secure systems.

Faster refunds

As money moves directly between bank accounts, refunds can often be processed much more quickly. In some cases, you may receive your money back within minutes rather than waiting several days for traditional card payment systems to clear.

Fewer declined payments

Since payments are authorised directly by your bank, there can be fewer issues caused by expired cards, incorrect card details, or card network outages.

Are there any drawbacks?

While Pay by Bank has a number of advantages, there are some potential downsides to consider.

Reduced purchase protection

One of the biggest differences between Pay by Bank and credit card payments is the level of protection available if something goes wrong.

When you pay by bank transfer, you generally don’t benefit from the purchase protections offered by credit card providers, such as Section 75 protection. This means that if a retailer goes out of business, fails to deliver your goods, or provides faulty products, you may have fewer options for recovering your money.

Not accepted everywhere

Although adoption is growing rapidly, not every retailer currently offers Pay by Bank. You may still need to use a debit or credit card in some situations.

Should you use Pay by Bank?

For many everyday purchases, Pay by Bank can be a fast, secure, and convenient way to pay online. It removes the need to enter card details, provides strong authentication through your bank, and can speed up refund times.

But for larger purchases where consumer protection is important, you may prefer to use a credit card to benefit from the additional safeguards available.

As with any payment method, it's worth considering both the convenience and the level of protection you need before deciding which option is right for you.