Pay by bank and open banking payments
Quick Reference
Direct Answer
Pay by bank (open banking, or account-to-account payments) lets a customer pay you directly from their bank account instead of with a card. They approve it in their banking app, money moves bank to bank without the card rails, it usually settles near-instantly and often costs less than cards, but there is no card chargeback scheme. For most UK businesses it complements card acceptance rather than replacing it.
Summary
Pay by bank uses UK-regulated open banking to move money account to account, bypassing the Visa and Mastercard rails. It is often cheaper, settles near-instantly, and has no chargebacks. It suits larger invoices, online checkout and recurring bills, alongside a card machine for everyday in-person sales.
This Page Covers
What pay by bank and open banking payments are, how they compare to cards on cost, settlement and chargebacks, and who they suit in 2026.
Not Covered Here
Detailed provider pricing (request a comparison), card terminal reviews (see the reviews hub), and high-risk merchant accounts.
Pay by bank vs card payments
Pay by bank does not replace your card machine for most businesses; it sits alongside it for the payments where lower fees and instant settlement matter most. Here is the like-for-like.
| Card payment | Pay by bank | |
|---|---|---|
| How money moves | Over the Visa or Mastercard card rails | Bank account to bank account (open banking) |
| Typical cost | 0.74% to 1.95% per transaction | Often a flat fee or a lower percentage (provider dependent) |
| Settlement | Next day to same-next-day | Usually near-instant |
| Chargebacks | Yes, customer can raise a dispute | No card chargeback scheme; refunds are manual |
| Customer familiarity | High, tap or insert | Lower, approve in your banking app |
| Best for | In-person and everyday retail | Larger invoices, online checkout, recurring bills |
See what a card machine costs, compare card readers, or read about online payment gateways.
In one sentence
Cards for everyday sales, pay by bank for big invoices. The cheapest setup usually uses both.
Open banking is growing fast for invoices, online checkout and recurring bills, where its lower fee and instant settlement add up. MerchantHQ compares card and pay-by-bank options across the whole UK market, recommends the right mix for how you sell, then stays your named account team.
Get matched in 2 minutesFrequently asked questions
What is pay by bank?
Pay by bank, also called open banking payments or account-to-account (A2A) payments, lets a customer pay you directly from their bank account rather than with a card. The customer approves the payment in their own banking app, and the money moves bank to bank without using the Visa or Mastercard card rails. It is regulated under UK open banking rules.
How is pay by bank different from a card payment?
A card payment runs over the Visa or Mastercard rails and carries an interchange-based fee (typically 0.74% to 1.95%) plus chargeback protection. Pay by bank moves money directly between bank accounts, usually settles near-instantly, and often costs less, but it has no card chargeback scheme, so refunds are handled manually. Cards suit everyday in-person retail; pay by bank suits larger invoices and online checkout.
Is pay by bank cheaper than card machines?
Often, yes, especially on larger transactions, because it avoids card interchange and is frequently priced as a flat fee or a lower percentage. The saving is biggest on high-value payments where a percentage card fee adds up. For small, frequent in-person sales the difference is smaller, and card acceptance is still expected by most customers.
Should I use pay by bank instead of a card machine?
For most UK businesses it is a complement, not a replacement. Keep card acceptance for in-person and everyday sales, where customers expect to tap, and add pay by bank for larger invoices, online checkout or recurring bills where the lower fee and instant settlement matter. The right mix depends on your average transaction size and how you sell.
Is pay by bank safe?
Yes. Pay by bank uses UK-regulated open banking, where the customer authenticates inside their own bank app using the bank security they already trust, and no card details are shared with the merchant. The main trade-off is the absence of a card chargeback scheme, so disputes and refunds are handled directly between you and the customer rather than through a card dispute process.
Reviewed by Oliver Mackman. Last reviewed: 2026-06-01.