What the rise of Pay by Bank in the UK means for banks, merchants and consumers

Every day, millions of payments are made online, as e-commerce solidifies its hold as the ‘go-to’ way to shop.

Traditionally, paying for goods and services requires customers to manually insert card details for every transaction made, with payments then taking hours or even days to process.

In recent years, Pay by Bank has gathered momentum as an alternative way to pay. These payments allow customers to pay a retailer or business directly from their bank account, using account-to-account (A2A) payment rails, rather than cards.

The foundations for this were laid in 2016, with the Open Banking PSD2 Regulations, which mandated that banks must allow third-party providers to access customer account data and initiate payments, with customer consent, via secure APIs.

These regulations were made applicable for banks in January 2018, with firms including MasterCard, HSBC and Natwest then rolling out their own initiatives.

Fast forward to 2026, and major retailers, including Amazon and eBay, are now integrating Pay by Bank payment capabilities into their services in the UK.

The growth in account-to-account payments was reflected in the UK government’s recently released Payments Forward Plan, which outlined the intention to enhance existing payment rail infrastructure to better support resilience and innovation in direct bank transfer payments.

The report also outlines plans to establish Open Banking on a commercially sustainable basis, advancing plans to make account-to-account payments ‘ubiquitous.’

With all this in motion, the pressure is now on for banks and fintechs to ensure they have the right architecture in place to meet the growing demands on them from customers, retailers and regulators.

For consumers, Pay by Bank means safer transactions. Using banking apps to verify transactions, often through biometrics, removes the fraud risk associated with cards and provides clear visibility of transactions. By establishing a secure connection between the customer’s intended transaction and their banks, this payment method also removes the need for shoppers to enter and store card details or update saved details when old cards expire.

On the merchant side, this model is becoming increasingly popular for companies looking for simple, secure and low-cost alternatives to cards for online payments. Allowing customers to pay for goods and services via banking apps offers companies lower transaction fees compared to traditional card payments and minimises the risk of chargebacks as payments are instantly verified.

In the last 10 to 15 years, cards have undergone a digital transformation to meet the demands of e-commerce, with digital wallets, tokenization and real-time monitoring now the norm. If Pay by Bank is to become a default e-commerce option, it must match that level of infrastructure maturity. Payments cannot afford to fail, and the architecture behind them is what prevents this from happening.

The idea that money moves overnight, or a few days later, is now outdated. Across the globe, real-time payment schemes are becoming less an optional innovation and more essential infrastructure. 

Direct bank transfers use account-to-account rails to deliver instant, irrevocable payments. However, this immediacy removes any margin for error, as when a customer clicks “pay,” the transaction must authenticate, process and settle in seconds.

Robust safeguards, including strong customer authentication and data protection, are also needed to minimise the risk of fraudulent transactions.

Pay by Bank is not just about retailers offering another payment option or finding an alternative to card fees. Instead, the shift towards account-to-account payments should be viewed as part of the wider structural shift in how money moves.

Its success depends just as much on whether infrastructure can flawlessly orchestrate payments 24/7 as it does on customer demand.

If banks are to capitalise on this opportunity, they must invest in dependable payment platforms that facilitate seamless checkout and can scale as retail demand for these payment methods increases.

The right infrastructure will determine long-term success and send a message to the e-commerce community, encouraging more household names to follow in Amazon and eBay’s footsteps and integrate Pay by Bank into their services.