Pay by Bank explained: how open-banking payments differ from cards

Plain-English glossary (once)

• Open banking — rules and tech so regulated firms can, with your consent, start payments or read account data via bank connections (APIs).
• PISP (Payment Initiation Service Provider) — an FCA-authorised firm allowed to start a payment for you.
• AIS / AISP — a firm that reads account data (e.g. budgeting apps) — related, not the same as paying.
• Faster Payments — the UK’s near-instant bank-to-bank payment system.
• SCA (Strong Customer Authentication) — extra proof it is you — e.g. biometrics or passcode in the bank app.
• VRP (Variable Recurring Payments) — ongoing payment mandates (sweeping between your own accounts came earlier; wider retail use is still evolving).

How it works behind the scenes

A PISP connects the merchant to your bank using open banking, with your consent. Authentication stays with your bank.

The PISP should not see your bank login password. Check authorised firms on the FCA Register.

How a checkout usually feels

1. Select Pay by Bank (wording varies: “Pay by bank transfer”, “Pay from your bank”).
2. Pick your bank from a list.
3. Redirect or deep-link into your bank’s app or site.
4. Check amount and payee → approve with SCA.
5. Return to the shop with confirmation.

You authorise a specific payment (amount and payee). That is different from handing over a card that can be charged again later — unless you set up a separate recurring mandate or VRP.

Pay by Bank vs card (consumer view)

Shoppers normally pay no extra fee. Shops often add Pay by Bank because processing costs can be lower than cards — that is not a reason this site pushes one method over another.

Three protection buckets

Protections are different from cards — not “none”. Which path applies depends on the facts.

1) Genuine shop — goods wrong or not delivered

• Start with the retailer’s refund policy.
• Card chargeback and credit-card Section 75 usually do not attach the same way, because Pay by Bank is not a card payment.
• Marketplace guarantees (for example Amazon A-to-z) may still cover that retailer’s Pay by Bank orders — Open Banking has noted Amazon coverage — but protections differ from cards and are still evolving.
• Unhappy with a regulated firm’s handling → the firm’s complaints process → possibly the Financial Ombudsman Service.

2) You were tricked into paying a fraudster (APP / bank-transfer scam)

Authorised Push Payment (APP) fraud is when you approve a payment to a scammer.

• If the payment went via Faster Payments or CHAPS to a scam account on or after 7 October 2024, PSR mandatory APP reimbursement may apply (FCA / PSR): typically up to £85,000, usually within 5 working days (complex cases longer). Firms may apply up to a £100 excess except for vulnerable customers. “Gross negligence” exceptions exist.
• Contact the sending bank immediately. Report to the police / Action Fraud (or Police Scotland).
• Pay by Bank to a fake shop or phishing payee can fall in this bucket — not the same as a normal Amazon order dispute.

Careful: this £85,000 APP reimbursement cap is not the same as FSCS deposit protection (£120,000 from 1 December 2025 if a bank fails). Never mix the two figures. Deposit protection if a bank fails is separate — FSCS £120,000 from 1 December 2025 (see FSCS pages when consulting that topic).

3) Unauthorised payment (you did not approve it)

• Separate rules under the Payment Services Regulations — tell the bank ASAP. FCA guidance: refund often by the end of the next business day unless exceptions apply.
• Time limit to claim is often 13 months (FCA consumer pages).

Never flatten this to “Pay by Bank = no protection”. Say different protection, depending on the scenario.

Scam and phishing angles

• Fake “Pay by Bank” buttons on phishing sites → you approve a transfer to criminals.
• Spoofed bank login pages — prefer the official app; check URLs.
• Impersonation: “bank / HMRC / courier — pay this invoice via open banking”.
• Check the PISP / merchant is who you think; use the FCA Register for authorised firms.
• Take Five: never move money because someone cold-called.

More on wider scam patterns: money scams 2026.

Five checks before you approve

1. Am I in my real bank app (not a random website)?
2. Is the amount what I expect?
3. Does the payee name match the shop I think I’m paying?
4. Did I start this checkout myself — or did a cold call / message push me here?
5. For an unexpected bill, can I verify the request on an official channel?

Where you may see it

Cited / seen: large online retail (Amazon UK added Pay by Bank at checkout in 2026, TrueLayer partnership per Open Banking), marketplaces (eBay cited in Open Banking insights), government (HMRC “Pay by bank account” for taxes since 2021), utilities and bills, some apps and in-store QR flows. It is still optional at many checkouts beside cards and wallets.

Open Banking Ltd has published adoption stats (for example 15m+ users and high November 2025 volumes on openbanking.org.uk) — date-stamp any figure you quote from there.

Policy watch (calm)

HM Treasury and the FCA continue work on the long-term open banking / open finance framework, VRP expansion and possible commercial access charging. Rules are still developing — outcomes are not yet known.

Related reading

Pay by Bank: FAQs

What is Pay by Bank?

Pay by Bank lets you pay a shop or bill directly from your current account. You approve the payment in your own banking app. Money usually moves on Faster Payments. You do not type card numbers. This page is not advice to use or avoid a payment method.

How does Pay by Bank differ from a debit or credit card?

Pay by Bank is an account-to-account transfer started via open banking. Cards run on card-scheme rails. Chargebacks and Section 75 do not attach the same way, because Pay by Bank is not a card payment. Protections differ by scenario.

Do shoppers usually pay a fee for Pay by Bank?

Usually £0 for the shopper — like a normal Faster Payment. Shops often offer it because merchant processing costs can be lower than cards. That is not a reason this site pushes one method over another.

Does Section 75 apply to Pay by Bank?

No. Section 75 of the Consumer Credit Act 1974 applies to certain credit-card purchases. Pay by Bank is not a credit-card purchase, so Section 75 does not apply in the usual way.

Can I use a card chargeback on a Pay by Bank payment?

Not in the usual Visa / Mastercard chargeback sense, because Pay by Bank is not a card payment. Start with the retailer’s refund policy. Marketplace guarantees may still cover some retailer Pay by Bank orders — protections differ from cards.

What if I was tricked into paying a fraudster?

That may fall under Authorised Push Payment (APP) rules if you approved a bank transfer to a scammer. PSR mandatory APP reimbursement may apply — typically up to £85,000. That £85,000 is not the same as FSCS £120,000 deposit protection.

Is APP £85,000 the same as FSCS £120,000?

No. APP reimbursement is about bank-transfer scams under PSR rules (typically up to £85,000). FSCS protects eligible deposits if a firm fails (£120,000 from 1 December 2025). Never mix the two.

What if I did not authorise the payment?

Unauthorised payments sit under separate Payment Services Regulations rules. Tell the bank ASAP. FCA guidance: refund often by the end of the next business day unless exceptions apply. Time limit to claim is often 13 months.

How is Pay by Bank different from open banking in budgeting apps?

Budgeting apps often use account information services (AIS) to read balances and transactions. Pay by Bank uses payment initiation (PISP) to start a payment. Related tech, different job. See UK budgeting apps.

Does this page recommend Pay by Bank?

No. This is general information, not personal advice. It is not advice to choose a payment method and not legal advice. There are no apply or sign-up links.

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