The way businesses accept payments is undergoing a fundamental shift. Margins are tightening, fraud risks are growing, and legacy systems like card terminals and manual bank transfers are proving too slow, costly, and error-prone to keep up with modern expectations. Finance teams and business leaders are being forced to reassess how money moves in and out of their organisations. And at the centre of this reassessment is a powerful, growing alternative: Pay by Bank.
Also known as bank-to-bank or account-to-account payments, Pay by Bank enables customers to make payments directly from their banking app or online banking platform without needing to enter card details, download any apps, or manually type out account numbers. It’s seamless, instant, and secure.
In this guide, we’ll unpack everything you need to know about Pay by Bank: what it is, how it works, how it compares to other payment methods, and why it’s rapidly gaining ground.
1. What is Pay by Bank?
Pay by Bank is a method of collecting payments that allows customers to send money directly from their bank account to a business’s bank account, authorised through their banking app or online banking environment. It is built on the infrastructure of open banking and the UK’s Faster Payments network.
The customer does not need to enter their card number, download a new app, or manually set up a bank transfer. Instead, they simply:
- Scan a QR code or click a payment link
- Select their bank from a list of supported providers
- Log in to their banking app using biometrics or passcode
- Approve the payment with a single tap
- Funds are transferred instantly to the business, with real-time confirmation
From the customer’s perspective, the experience is intuitive and familiar, and from the business’s perspective, the funds arrive quickly with minimal friction or admin.
Unlike card payments, Pay by Bank cuts out the middlemen: there are no card networks, acquirers, or hardware terminals. That translates to fewer fees, fewer delays, and fewer opportunities for errors or fraud.
2. The infrastructure behind Pay by Bank
To understand the significance of Pay by Bank, it’s important to understand what powers it: open banking and Faster Payments.
Open Banking
Introduced in the UK in 2018, open banking refers to a set of regulations and technologies that allow third-party providers to access financial data and initiate payments on behalf of customers with their consent.
Pay by Bank uses open banking APIs to initiate payments directly between accounts. These APIs provide the secure bridge between a customer’s bank and the payment provider, facilitating fast, encrypted, authenticated transactions.
Faster Payments
Faster Payments is the UK’s national real-time payment system, capable of processing thousands of payments per second. It underpins the final leg of the transaction, ensuring that when a customer approves a Pay by Bank payment, the money arrives almost instantly.
Combined, these two systems allow Pay by Bank to offer:
- Real-time settlement
- Strong customer authentication (SCA)
- Seamless payment flows across mobile and desktop
- Bank-level encryption and data protection
Together, open banking and Faster Payments enable what’s formally known as Payment Initiation Services (PIS)—a regulated activity under UK law that allows authorised third parties to initiate payments directly from a user’s bank account, with their explicit consent. In the context of Pay by Bank, this means businesses can securely request payments without needing to handle sensitive financial data themselves. It’s this combination of regulatory frameworks, real-time infrastructure, and streamlined user experience that makes it such a powerful, modern alternative to cards and manual bank transfers.
3. Why businesses are making the switch
As finance teams continue to scrutinise cost centres and customer experience, many are finding that legacy payment systems no longer deliver the value or performance they once did.
3.1 Reduced Fees
One of the biggest reasons businesses switch to Pay by Bank is to reduce payment processing costs.
With card payments, businesses typically pay 1.5% to 3.4% per transaction once you factor in interchange fees, acquirer fees, PCI compliance costs, and hardware rental. These fees quietly eat into margins, especially for businesses with high transaction volumes or large average order values.
By contrast, Pay by Bank avoids card networks entirely. Most open banking payment providers charge between 0.5% and 1%, with no need for costly card machines or terminals. Some providers offer volume-based discounts, bringing fees even lower.
3.2 Instant Settlement
Card payments usually take 1-3 working days to settle, creating a lag between sale and cash flow. That delay can be especially painful for businesses with high working capital requirements.
Pay by Bank settles funds instantly. The moment a customer approves a payment, the funds land in your account, ready to use.
Faster settlement means:
- Better control of cash flow
- Less need for short-term credit
- Reduced reconciliation headaches
3.3 Improved Customer Experience
Customers increasingly expect frictionless, mobile-first payment experiences. Long forms, card rejections, and failed payments create friction that drives up abandonment rates and reduces satisfaction.
Pay by Bank delivers a smoother checkout:
- No card numbers or expiry dates to type
- No password resets or logins to remember
- No additional apps or downloads
It’s especially effective for mobile-first customers, who prefer fast, tap-and-go experiences.
3.4 Stronger Security & Fewer Disputes
Pay by Bank is inherently more secure than card payments or manual bank transfers.
- Each transaction is approved within the customer’s bank environment
- Strong Customer Authentication (SCA) is mandatory
- There are no card numbers or CVVs to steal
- No chargebacks: payments are final once authorised
This reduces fraud, disputes, and chargeback-related losses—a major win for finance and operations teams.
4. Industry use cases: How different sectors are adopting it
Pay by Bank isn’t just for tech startups or ecommerce sites. It’s proving useful across a wide range of sectors.
Legal & Professional Services
Law firms and accountancies are using Pay by Bank links to collect retainers, consultation fees, and invoices, streamlining payments and removing the need to chase clients.
Automotive Dealerships
Car dealerships process large-value transactions such as service fees, deposits, and final purchases. With Pay by Bank, payments are not subject to card transaction limits and settle instantly.
Healthcare & Dental Clinics
Clinics use QR codes at the front desk or SMS payment links post-appointment to collect payments discreetly and efficiently. It also reduces the need to handle cards or cash.
Hospitality & Retail
Restaurants place QR codes at tables for guests to pay when ready. Retailers embed Pay by Bank in their online checkouts or POS systems for faster turnover and reconciliation.
Property & Trades
Letting agents and tradespeople use Pay by Bank to send invoices or request deposits with minimal admin. It works via email, SMS, or even WhatsApp.
5. Pay by Bank vs. other payment methods
To help visualise the differences, here’s how Pay by Bank stacks up against other popular payment methods:
| Feature | Pay by Bank | Card payments | Bank transfers | Direct Debit | Mobile wallets |
|---|---|---|---|---|---|
| Fees | 0.5% – 1% | 1.5% – 3.4% | Low | Low | Varies |
| Settlement speed | Instant | 1–3 days | Same day | Days | Instant |
| Chargebacks | None | Yes | Rare | Low | Yes |
| Hardware required | No | Yes | No | No | Sometimes |
| Customer effort | Low | Medium | High | Low | Medium |
| Fraud risk | Very low | Moderate | Low | Low | Medium |
6. Security and compliance
Security is one of the biggest advantages of Pay by Bank. Transactions are:
- Authorised directly through the customer’s bank
- Protected by bank-grade encryption
- Compliant with PSD2 and Strong Customer Authentication (SCA) regulations
Most providers are regulated by the Financial Conduct Authority (FCA) as Authorised Payment Institutions. Many, like Atoa, are also ISO 27001 certified.
Because no card data is collected or stored, Pay by Bank significantly reduces PCI compliance burdens, fraud exposure, and internal data security risks.
7. Implementation: How easy is it to set up?
Contrary to assumptions, setting it up is fast and straightforward.
You don’t need new hardware, apps, or IT support in most cases. Here’s how businesses typically implement it:
In-Store
- Display QR codes at checkout, table, or reception
- Customers scan and approve via mobile banking app
Remotely
- Send payment links by SMS, email, or WhatsApp
- Include Pay by Bank options in digital invoices
Online
- Add Pay by Bank as a checkout option on your website for a more seamless payment gateway
- Integrate with ecommerce or POS platforms via plugins or APIs
Many providers offer plug-and-play integrations with Xero, QuickBooks, or Sage, meaning you can embed Pay by Bank into your invoice flow without coding.
8. Common questions & misconceptions
“Is Pay by Bank just a manual bank transfer?”
Not at all. Pay by Bank removes the need for customers to manually type in sort codes and references. It uses open banking APIs to guide the payment and confirm success.
“Do I need to stop accepting cards?”
No. Pay by Bank can complement your existing payment methods. Many businesses run it alongside cards or wallets, then encourage uptake over time to save money on fees.
“Will my customers know how to use it?”
Yes. Over 80% of UK adults now use online or mobile banking. The flow is familiar, simple, and doesn’t require anything new to be downloaded.
“Can customers get a refund?”
Yes. Refunds can be processed manually or through your payment provider’s dashboard. And because Pay by Bank doesn’t allow for chargebacks, businesses maintain full control over the refund process—reducing the risk of disputes and unexpected revenue loss.
9. What the future for Pay by Bank looks like
Pay by Bank is not a passing trend. It’s part of a broader shift toward open finance, instant payments, and streamlined customer experiences.
Emerging Trends to Watch:
- Variable Recurring Payments (VRP): A smarter, bank-to-bank alternative to Direct Debit, launching in phases across the UK.
- Embedded Payments: Pay by Bank buttons integrated into ecommerce flows, messaging apps, and even invoices.
- PSD3 and beyond: EU and UK regulation updates are strengthening consumer protections and standardising open banking across borders.
- Biometric payments: More banks are enabling biometric authentication (Face ID, fingerprints) as the default method of authorising payments.
Businesses that move early on Pay by Bank will be better positioned to capitalise on these changes.
10. Atoa: One example of Pay by Bank in action
Providers like Atoa are helping thousands of UK businesses adopt it quickly and affordably.
- FCA-authorised and ISO-certified
- Trusted by retailers, clinics, law firms, and car dealerships
- Seamless integrations with Xero, QuickBooks, Sage
- Instant settlement and real-time notifications
Businesses have reported saving thousands per month in payment fees while improving reconciliation and customer experience.
Final thoughts
If you’re still relying solely on card payments or manual bank transfers, now is the time to explore your options. Pay by Bank represents more than just a cheaper payment method. It’s a smarter, faster, and more secure way to manage cash flow, delight customers, and reduce admin. As finance leaders look to future-proof their operations, reduce costs, and improve control over payments, Pay by Bank is no longer a nice-to-have. It’s a competitive advantage.
Ready to learn more?
Want to see what this could look like in your business? Book a walkthrough with your finance team and explore providers like Atoa to see real-world savings in action.
[Book a walkthrough] or visit paywithatoa.co.uk to get started.
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