How pay by bank works
The steps are the same in the EU and in the UK:
- The customer chooses pay by bank and picks a bank from a list
- The checkout hands over to the bank's app, with the amount and the payee already filled in
- The customer authenticates with the bank, usually by fingerprint or face
- The bank executes a credit transfer, instant where the rail supports it
- The provider tells the merchant that the payment was initiated, and later that the funds arrived
What EU law says about payment initiation
PSD2 defines a payment initiation service as a service to initiate a payment order, at the user's request, on a payment account held at another provider. The payer's right to use one applies only where the account is accessible online.
The bank must treat an order that arrives through a payment initiation provider without discrimination, in timing, priority or charges, compared with an order the payer gives directly, other than for objective reasons.
Why merchants and platforms use pay by bank
There is no interchange and no card scheme fee, and on instant rails the merchant is paid in seconds. The payer authorises each payment at the bank, and no card chargeback process stands behind it.
The trade-offs are real. A refund is a separate transfer that the merchant sends, recurring payments need a different mechanism, and conversion depends on how smoothly each bank's app handles the handover. A status of initiated is not proof of receipt, so merchants reconcile against the incoming transfer.
Pay by bank, card payment or direct debit?
- Card payment
- Pulled by the merchant through a card scheme, with authorisation, clearing and chargeback rights.
- Direct debit
- Pulled by the payee under a mandate, and open to return or refund afterwards. Pay by bank is a single push that the payer approves in the moment.
- Manual bank transfer
- The customer types the IBAN, the amount and a reference. Pay by bank fills them in, so there are no typing errors and the payment can be matched automatically.
Where Pay by bank shows up in a platform
Modules that do the work
- CheckoutA hosted checkout for cards, wallets, bank payments and crypto, routed to the best provider.
- Accounts & IBANsCustomer accounts with their own IBANs, on the partner bank and the rails you choose.
- AuthenticationSign-in, passkeys and second factors for customers and staff, on your identity provider or ours.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.