What is pay by bank, and how is it different from paying by card?

#What does 'pay by bank' mean?

Pay by bank (also called account-to-account payment or open banking payment) is a way to pay a merchant directly from your bank account, without a card. Behind the button sits a payment initiation service, which UK law defines as an online service that starts a payment order at your request from an account you hold with another provider⁠^[1]. When the European Commission introduced these services under PSD2, it described them as letting consumers pay online by credit transfer while telling the merchant immediately that the payment has been started⁠^[2].

The company that runs the button is a payment initiation service provider (PISP). It is a go-between for instructions, not a bank: UK rules say it must not hold the payer's funds at any time, must not change the amount, the payee or any other feature of the transaction, and must not store your sensitive payment data⁠^[3]. New to the whole idea? Start with what is open banking.

#What happens when you press 'pay by bank'?

At the approval step your bank applies strong customer authentication, such as your banking app's fingerprint login. Your bank must then pass the payment on in the same way, and with the same timing and charges, as if you had ordered it yourself⁠^[3]. Technically, the app and the bank talk through an API; the UK standard has separate payment-initiation resources such as domestic payments⁠^[4], explained in how banking APIs work.

In the UK the money usually moves over the Faster Payment System, which Pay.UK says was created in 2008, is available day and night, 365 days a year, and supports real-time payments of up to £1 million, although individual banks may set lower limits⁠^[5]. Our payments channel explains these rails in instant payments explained.

#How is pay by bank different from paying by card?

A card payment is a pull: the merchant's provider asks your card issuer for money through a card network. Pay by bank is a push: your own bank sends the money after you approve it. That single difference changes who is involved and what happens if something goes wrong. The full card journey is in how card payments work.

#What are variable recurring payments?

A normal pay-by-bank payment is a one-off: you approve one amount, once. Variable recurring payments (VRPs) let you give a trusted provider a standing permission to manage a series of payments for you. Regulators describe commercial VRPs as using open banking technology to let users securely authorise trusted third parties to manage recurring transactions⁠^[7]. The first commercial use cases prioritised by the FCA and the Payment Systems Regulator are regulated financial services, regulated utilities, and local and central government⁠^[7].

In June 2026 the FCA welcomed the launch of the UK Payments Initiative scheme for commercial VRPs and said it will consult on a long-term regulatory framework by the end of 2026⁠^[8]. The VRPs already counted by Open Banking Limited are sweeping VRPs: 7.73 million in June 2026, up 6.7% on the month⁠^[9].

#What protects you if a pay-by-bank payment goes wrong?

Because no card network is involved, the card chargeback process (see chargeback) does not apply. In the UK, the main safety net for scams is the authorised push payment (APP) fraud reimbursement regime. APP fraud is when you are tricked into sending money to a fraudster by bank transfer. Since 7 October 2024, victims of payments over Faster Payments or CHAPS between UK accounts can claim up to £85,000, should report within 13 months, and firms may apply an optional £100 excess, which cannot be applied to vulnerable consumers⁠^[6].

The regime has limits. It does not cover civil disputes, where you pay a genuine supplier and the goods are not received or are defective, and you will not get your money back if you were complicit or grossly negligent⁠^[6]. Learn the warning signs in authorised push payment fraud explained. In the EU, the agreed PSD3 package adds a check of the payee's name against the IBAN before a transfer⁠^[10].

#Does pay by bank exist outside the UK?

Yes, under different rules. In the EU, payment initiation is a regulated service under PSD2⁠^[2]. In the US, the CFPB's 2024 data rule lists payment initiation information, such as account and routing numbers or a tokenised account number, as covered data⁠^[11], though the rule is currently not being enforced⁠^[12]; see the CFPB 1033 rule explained. The underlying bank transfer rails differ by country, as the guide to ACH, wire and instant payments shows.