Xero is a powerful tool for managing invoices and cash flow, but there’s one area that can quietly eat into your profits: payment fees. Every time a customer pays you by card through a Xero invoice, you lose a percentage of that revenue to card networks and payment processors. For small businesses, that adds up fast. But here’s the thing, you don’t need to switch away from Xero payments to cut those costs. By adjusting how customers pay, you can lower your fees, speed up settlements, and keep more of what you earn, all without changing the software already in use.

Why Xero payment fees add up

When customers pay your invoices by card, multiple fees are involved:

• Card network fees (Visa, Mastercard, etc.)
  
  
• Payment processor fees (Stripe, PayPal, etc.)
  
  
• Fixed charges per transaction (often 20–30p each)

For domestic cards in the UK, this often means 1.4% + 20–30p per transaction, while international cards can cost 2.9% + 30p or more. If you’re invoicing thousands of pounds a month, that’s a significant slice of revenue lost.

The alternative: Pay by Bank

You don’t need to abandon Xero to escape high card fees. Instead, you can change the payment method your invoices accept. Pay by Bank is now supported by Xero through certified partners like Atoa. Instead of routing payments through card networks, your customers pay you directly from their bank account.

Here’s why this matters:

• Lower fees: Pay by Bank can reduce costs significantly.
  
  
• Instant settlement: Payments land in your account within seconds, not days.
  
  
• No chargebacks: Money moves securely account-to-account, so disputes can’t drain your cash flow.
  
  
• Smooth checkout: Customers authorise payments in their own banking app, which means the security is water-tight.

And best of all, everything still flows through Xero, so your invoices, reconciliation, and accounting processes don’t change.

How to enable Pay by Bank in Xero

Adding Pay by Bank is simple and takes only a few minutes:

1. From your Xero Dashboard, go to Business → Online Payments.
   
   
2. In the Manage payment methods tab, select a provider (e.g. Atoa) and click Turn On.
   
   
3. Choose the bank account where payments will settle.
   
   
4. Once connected, every invoice you send will display a “Pay now” button.

Your customers then choose Pay by Bank, select their bank, and approve the payment. You receive funds instantly, and Xero marks the invoice as paid automatically. Here’s how it works:

Why this works without changing software

The best part of this approach is that you don’t need to replace Xero or disrupt your existing systems. Your invoicing, reconciliation, and reporting stay the same. The only change is behind the scenes: instead of paying high card fees, you’re using a direct-to-bank method that costs less and settles faster. Providers like Atoa Payments Limited are FCA-authorised and ISO 27001 certified, giving you peace of mind that transactions are secure and compliant. Plus, Atoa integrates with Xero easily, so your finance team stays in control across tools.

The bottom line

If you’re tired of card fees eating into your margins, you don’t need to leave Xero to solve the problem. By enabling Pay by Bank, you can keep your invoicing workflow exactly as it is while reducing fees, eliminating chargebacks, and getting paid faster. For UK businesses, that means more cash in your account and less wasted on card networks, all without switching away from the software you already trust.