The cheapest way to accept payments for small business: cards vs Pay by Bank

Introduction

Every small business eventually asks the same question: What is the cheapest way to get paid?

The instinctive answer is to “shop around” for a cheaper card provider. But that only tackles one part of the problem. The real cost difference sits deeper, in the payment technolgy itself.

This article breaks down the economics of accepting payments in the UK, comparing traditional card processing with Pay by Bank. We hope it provides a clear decision framework based on how businesses actually operate.

The real cost of card payments

Card payments appear simple on the surface. Tap, approve, done. But behind that simplicity sits a multi-party system:

• Card schemes (Visa, Mastercard)
• Issuing banks – the customer’s bank
  The bank that gives your customer their card and pays on their behalf.
• Acquiring banks – the business’s bank for taking payments
  The bank (or provider) that receives the payment for you and gets it into your account.
• Payment processors – the system moving the payment through the network
  The behind-the-scenes engine that sends the request between banks and returns “approved” or “declined”.
• Payment gateways – the secure online checkout
  The technology that captures the customer’s payment details and sends them for approval.

Each layer takes a share of the transaction.

In practice, UK small businesses typically pay:

• 1.5% to 3.5% per transaction¹
• Additional fixed fees (gateway, authorisation, PCI compliance)²
• Monthly or terminal-related costs

These charges are not arbitrary. They are structurally embedded in the system. Interchange fees alone, paid between banks on every transaction, form the largest portion of the total cost³.

Even with negotiation, most businesses are optimising margins within a fixed-cost architecture.

Why card fees are difficult to reduce

There is a persistent belief that switching provider solves the problem. It helps, but only marginally. The reason is structural:

• Interchange fees are largely fixed or regulated;
• Scheme fees are non-negotiable;
• Only the acquirer markup is flexible.

In other words, most of the cost base is outside your control.

This is why many small businesses continue to absorb thousands of pounds per year in processing fees, simply for moving money from customer to merchant⁴.

How Pay by Bank changes the economics

Pay by Bank works differently. Instead of routing payments through card networks, it moves money directly from the customer’s bank account to the business account using Open Banking infrastructure.

That removes entire layers of cost.

Typical UK pricing:

• 0.1% to 1.0% or ~£0.20–£0.50 per transaction⁵
• In some cases, flat fees as low as a few pence⁶
• At Wonderful, a monthly subscription model which starts at just £9.99 plus VAT and includes 1,000 transactions each month (1p / transaction)

There is no interchange. No scheme fee stack. No chargeback infrastructure to fund. The result is not a cheaper version of cards. It is a different cost model entirely.

Cost comparison: cards vs Pay by Bank

Let’s make this concrete.

Take a small business processing £50,000 per month across 500 transactions, an average order value of £100.

Using a typical card provider such as Stripe at a headline rate of 1.5% + 20p per transaction:

• Percentage fees: 1.5% of £50,000 = £750
• Fixed fees: 500 × £0.20 = £100
• Total monthly cost: £850

Now compare that with Wonderful Pay by Bank:

• Fixed subscription: £9.99 + VAT per month
• Transaction fees: £0
• Total monthly cost: £9.99 + VAT

That is not a marginal saving. It is a structural difference.

• Monthly saving: ~£840
• Annual saving: ~£10,000

And importantly, this is not dependent on negotiating rates or hitting volume tiers. The economics are fundamentally different.

For higher-volume or higher-ticket businesses, the gap widens further, because card fees scale with value, while Pay by Bank pricing does not.

Across the UK, this is why businesses that rely solely on cards continue to carry a significant and largely avoidable cost base⁷.

Settlement speed and cash flow

Cost is only part of the equation. Settlement timing matters just as much.

Cards:

• Typically 1 to 3 working days
• Funds aggregated and paid out in batches

Pay by Bank:

• Near-instant or same-day settlement via Faster Payments⁵

For small businesses, this has real implications:

• Improved cash flow;
• Reduced reliance on credit;
• Faster reinvestment into stock, payroll, or marketing.

This is often overlooked, but operationally significant.

Risk, fraud and operational overhead

Card payments carry embedded risk costs:

• Chargebacks;
• Fraud management;
• PCI compliance requirements.

These are part of what merchants pay for.

Pay by Bank changes that profile:

• Payments are authorised directly in the customer’s banking app;
• Strong Customer Authentication is built in;
• No chargeback model in the same sense as cards⁸.

That removes both cost and operational friction.

Customer experience: where the trade-offs sit

This is where the decision becomes more nuanced.

Cards:

• Universally understood;
• Fast, familiar, frictionless;
• Embedded rewards (points, cashback).

Pay by Bank:

• No card entry required;
• Payment details pre-filled;
• Increasingly fast and simple, but still evolving.

There are trade-offs:

• No rewards layer for consumers (yet);
• Slight behavioural shift required.

However, adoption is accelerating as user journeys improve and awareness increases.

A practical decision framework for small business

The right answer is rarely black and white. Instead, consider:

Use Pay by Bank where:

• Transaction values are higher;
• Margins are tight;
• You want to reduce processing costs materially;
• Faster settlement improves operations.

Keep cards where:

• Customer expectation is critical;
• Low-value, high-frequency transactions dominate;
• Rewards-driven behaviour matters.

Most successful implementations are hybrid, rather than replacement.

A structural shift, not a pricing tweak

This is the key point most content misses. Comparing card providers is optimisation. Adopting Pay by Bank is a structural shift in how payments work.

As Open Banking adoption continues to grow in the UK, more businesses are recognising that reducing fees is not about negotiating harder, it is about choosing a different system altogether.

CEO perspective

“For years, small businesses have been told to negotiate better rates. But the reality is that most of the cost is baked into the system. Pay by Bank changes that completely. It removes layers rather than trimming them, and that’s where the real savings come from.”
— Kieron James, CEO and Co-Founder, Wonderful

Conclusion

If you are asking for the cheapest way to accept payments, you are really asking a deeper question:

Do you optimise within the existing system, or do you adopt a new one?

Cards are efficient, trusted, and embedded.

Pay by Bank is simpler, lower cost, and structurally different.

For UK small businesses, the most effective approach today is not choosing one over the other, but understanding where each creates the most value.

Frequently asked questions

What is the cheapest way for a small business to accept payments in the UK?

For most small businesses, Pay by Bank is the lowest-cost option because it avoids percentage-based card fees. Instead of paying 1.5%–3.5% per transaction, businesses can use fixed-fee or near-zero fee models, which materially reduce costs at scale.

Is Pay by Bank cheaper than card payments?

Yes, in most cases.

Card payments charge a percentage of every transaction plus fixed fees. Pay by Bank removes those percentage fees entirely or reduces them significantly.

As shown above, a business processing £50,000 per month could pay ~£850 with cards vs ~£9.99 + VAT with Wonderful, depending on the provider and structure.

Why are card payments more expensive?

Card payments involve multiple parties, including issuing banks, acquiring banks, card schemes, and processors. Each takes a share of the transaction.

These costs are built into the system, which is why switching providers usually only delivers small savings rather than a step change.

Do customers trust Pay by Bank?

Yes, increasingly.

Pay by Bank uses secure bank authentication, where customers approve payments directly in their banking app. This means:

• No card details are entered or stored
• Strong Customer Authentication is built in
• The experience is backed by the customer’s own bank

Adoption continues to grow across the UK as awareness improves.

Is Pay by Bank slower than card payments?

No.

In many cases, it is faster from a settlement perspective.

• Cards: typically settle in 1–3 working days
• Pay by Bank: often settles instantly or the same day via Faster Payments

This improves cash flow for small businesses.

Can I replace card payments completely?

In most cases, the best approach is to offer both.

Cards remain useful where:

• Customers expect to use them
• Rewards or credit features influence behaviour

Pay by Bank is ideal where:

• You want to reduce fees
• Transaction values are higher
• Faster settlement matters

A hybrid approach allows businesses to optimise both cost and customer experience.

What types of businesses benefit most from Pay by Bank?

Pay by Bank delivers the greatest benefit where:

• Margins are tight
• Transaction values are moderate to high
• Payment costs materially impact profitability

This includes trades, professional services, hospitality, e-commerce, and charities.

Is Pay by Bank secure?

Yes.

Pay by Bank is regulated and built on Open Banking infrastructure. Payments are authorised within the customer’s banking environment, reducing fraud risk and eliminating the need to handle sensitive card data.

How do I start accepting Pay by Bank as a small business?

Most providers, including Wonderful, allow you to:

• Generate payment links or QR codes
• Accept in-person or online payments
• Integrate into existing systems via APIs or plugins

Setup is typically faster and simpler than traditional card acquiring.

Footnotes

1. Credit card processing fees typically 1.5%–3.4%. Link
2. Additional gateway and compliance costs. Link
3. Interchange fees form the largest component of card costs. Link
4. Example of annual cost burden for UK businesses. Link
5. Open banking fees typically 0.1%–1% or £0.20–£0.50. Link
6. Flat fee models as low as a few pence. Link
7. UK organisations spending more without open banking. Link
8. Reduced fraud exposure and no traditional chargebacks. Link