Pay by Bank: why it’s gaining ground with consumers and businesses alike

If you caught last week’s episode of BBC Morning Live, you’ll have seen a timely and engaging segment on a payment method that’s fast becoming a serious alternative to debit and credit cards: Pay by Bank.

While the phrase might sound unfamiliar to some, the concept is simple. And the momentum behind it is growing fast. According to the programme, over 25 million Pay by Bank transactions now take place each month in the UK. That’s not a future trend, it’s already happening, and it’s reshaping how we pay online and in-app.

What is Pay by Bank?

Pay by Bank enables consumers to make payments directly from their bank account, without the need to enter card details or share sensitive information with merchants. At the checkout, customers select “Pay by Bank” as their preferred method, choose their bank from a list of well-known providers, and authorise the transaction securely via their mobile banking app or online banking portal.

It’s underpinned by Open Banking technology, which was introduced in the UK and across Europe in 2018 as part of a regulatory push to increase competition and give consumers more control over their financial data. While Open Banking initially focused on data sharing, it has now matured into a highly secure and efficient payment infrastructure.

A frictionless, secure customer experience

One of the standout advantages for consumers – as highlighted by the Morning Live team – is the ease and security of Pay by Bank. There’s no need to dig out your card, type in long numbers, or worry about expiry dates and CVV codes. Instead, the transaction is initiated from the checkout page and authorised through your banking app – often using Face ID or fingerprint recognition. Within seconds, you’re done.

There’s also less exposure to fraud. Card-based payments inherently involve handing over sensitive information to a third party, whether that’s the merchant or the payment processor. With Pay by Bank, those details are never shared. The retailer doesn’t see your account number, sort code, or any card data. That greatly reduces the risk of phishing, data breaches and card cloning.

As the presenters noted, this gives peace of mind to customers increasingly wary of online scams and phishing attempts. The key point here is control. The customer remains in their trusted banking environment throughout the transaction.

So what’s changed – and why now?

Although Open Banking has been available since 2018, uptake was initially slow. That’s now changing. And fast. According to Morning Live, the reason isn’t just better consumer awareness, but the increasing number of mainstream retailers offering Pay by Bank at checkout. Visibility is improving, the user experience is smoother, and confidence is growing.

What was once a niche or experimental option has become a genuinely viable alternative for millions of consumers, particularly on mobile devices, where the entire process, basket to bank to confirmation, can take less than 30 seconds.

The cost case for merchants

This isn’t just good news for consumers. For businesses, especially SMEs and charities, the benefits are arguably even more compelling.

Card processing fees - including interchange, scheme fees, and acquirer margins - often add up to 2-3% of each transaction. For small businesses operating on tight margins, that’s a heavy cost to absorb. In contrast, Pay by Bank transactions typically cost less than half that, and Wonderful charges just a penny per payment.

As the segment pointed out, this can have a huge impact across thousands of transactions. A business shifting even a portion of its payments to Pay by Bank can see significant savings, not to mention reduced risk of chargebacks, disputes, and fraud-related losses.

At Wonderful, we’ve seen this first-hand. Our platform enables merchants and charities to accept Pay by Bank payments quickly and easily, with transparent, low-cost pricing. For registered charities, we go a step further: we offer the service completely free of charge.

Is there a catch?

There’s always nuance. As the Morning Live team rightly discussed, Pay by Bank doesn’t come with Section 75 protection, which credit cards offer for purchases over £100. Refund processes may also be less familiar to some users - although consumer rights still apply, and merchants can issue refunds in exactly the same way as with card payments.

That said, for everyday purchases, particularly under £100, Pay by Bank is an increasingly popular choice. It’s fast, secure, intuitive, and crucially aligned with how people now manage their finances: through mobile apps and instant approvals, not plastic cards and billing statements.

A turning point for Open Banking?

The tone of the segment was clear: this isn’t hype. Pay by Bank is now a mainstream, regulated payment method, authorised by the FCA and offered by every major UK bank. It gives consumers more control and offers businesses an opportunity to lower costs without compromising on user experience.

In a time when consumers are looking for speed, safety, and simplicity - and businesses are fighting rising costs - Pay by Bank ticks all the right boxes. It’s the next logical step in the evolution of payments, and we’re proud to be playing a part in making it more accessible to everyone.

If you’re a business owner, charity, or developer looking to accept Pay by Bank payments, or just curious about how it works, we’d love to talk. Open Banking is no longer a future trend. It’s already here.

Photo by Priscilla Du Preez 🇨🇦 on Unsplash