Think about the last time you made a payment online. You probably expected it to clear instantly. That expectation isn’t wishful anymore; it’s how modern payments work. For UK businesses, transactions can’t afford to crawl through banking hours or batch settlements. They need to move as fast as customers do – smooth, secure, and instantly. That’s where instant bank payments come in. Powered by the UK’s Faster Payments Service (FPS) and open banking technology, they credit funds in seconds. In 2024, FPS processed over 5 billion transactions worth £4 trillion, proving that instant payments are now part of everyday business.

In this guide, you’ll learn what instant bank payments are, how they work, why they matter for your business.

What are instant bank payments?

Instant bank payments are transactions executed directly between a payer’s bank account and a merchant’s bank account, with nearly immediate settlement. Unlike card payments (which pass through multiple intermediaries and may take days to settle) or Direct Debits (which operate on batch cycles), instant bank transfers use rails such as FPS and are often supported by open-banking APIs for authentication and initiation. Banks and payment providers often brand this as Pay by Bank, account-to-account (A2A) payments, or “instant bank transfer”. 

How instant bank payments work: A step-by-step flow

Here’s a practical walkthrough of the process from a business perspective:

1. A customer selects “Pay by Bank” (or similar) at the checkout, invoice link, or QR-code screen.
   
2. They’re redirected (or held in-app) to their banking environment via open-banking API. They authenticate via SCA (e.g., Face ID / fingerprint).
   
3. They approve the payment request, which contains the business details + amount.
   
4. The payer’s bank initiates the transfer on the FPS rail. The merchant’s bank receives the funds and confirms payment settlement to the merchant’s system (often via webhook).
   
5. Funds land in the business’s account, and the merchant updates order/invoice status in real time, often integrated with accounting tools.

Note: While marketed as “instant”, settlement time can vary slightly depending on bank participant, risk checks or indirect routing. 

You can learn more about the broader concept of [Pay by Bank] here in our Atoa blog.

Business benefits & use cases

• Improved cash flow & liquidity. When payments settle instantly, your working-capital isn’t locked up for days. You can reinvest, ship faster, or reduce credit risk.
  
• Lower transaction costs & fewer intermediaries. By bypassing card networks and reducing chargebacks/disputes, you often pay a smaller per-transaction fee versus card processing.
  
• Superior customer experience. With fewer steps, no card numbers, and seamless bank authentication, conversion rates can improve, and customers perceive smoother service.
  
• Operational efficiency & reconciliation. Many providers offer automated payment matching, webhook notifications and accounting integration, saving time and reducing errors.

Use-case examples:

• E-commerce brands use instant bank payments to give customers real-time order confirmation and improve checkout conversion.
  
• Professional service providers (like law firms or beauty salons) send payment links that let clients settle invoices instantly and reduce late payments.
  
• Retailers and cafés display QR codes so customers can scan, approve the payment in their bank app, and receive instant receipts.
  
• Veterinary and healthcare clinics use instant bank transfers to simplify billing and free staff from manual payment chasing.
  
• Gyms and membership-based businesses rely on them for renewals or add-ons, removing the need for delayed card settlements.

Together, these examples show how instant bank payments fit naturally into modern business workflows, helping companies save time, reduce costs, and deliver smoother customer experiences.

What it costs & what “Free” means

For consumers, using a “Pay by Bank” or instant bank payment option is typically free. They don’t pay extra beyond their normal banking relationship. However, the picture is slightly different for businesses. While you avoid card interchanges and some scheme fees, you’re still paying your payment-service provider for API access, settlement, monitoring, and integration. Even so, the total cost often remains significantly lower than traditional card fees, especially over large volumes. 

So, here’s the key questions to ask providers: What is the flat fee or per-transaction fee? Are there monthly minimums, or hidden costs for refunds/reversals? What settlement speed is guaranteed? This ties into broader “Pay by Bank” pricing structures covered in our article: “The real cost of open banking payments” (insert internal link here).

Implementation checklist for UK businesses

• Start by identifying where instant bank payments can make the biggest difference. For example, online checkout, payment links in invoices, or QR payments in-store.
  
• Look for a UK-regulated provider that supports instant bank payments, connects with your accounting tools (like Xero or QuickBooks), and integrates seamlessly into your existing systems.
  
• Let your customers know they can pay directly from their bank account and funds arrive instantly. Simple, transparent messaging builds trust and encourages adoption.
  
• Ensure your team understands how the new flow works, from receiving settlement notifications to automatic reconciliation. Most providers offer webhook or API-based updates to simplify matching.
  
• Instant payments don’t use card networks, so traditional chargebacks don’t apply. Define your own fair, transparent policy for handling refunds or payment disputes to keep customer confidence high.

For example, if your business uses Xero for invoicing, you can activate Pay by Bank directly through your provider. Once enabled, customers can settle invoices instantly and see them automatically marked as paid. 

See our related article: “How to Take Pay by Bank in Xero” for a detailed guide.

Challenges & considerations

• Not truly “instant” in all cases. Some banks, indirect participants or unusual risk checks might introduce delays (up to ~2 hours).
  
• Limited consumer protection vs cards. Cards benefit from schemes like Section 75 or chargeback rights; Pay by Bank doesn’t always carry the same protections, so ensure your refund policy is clear.
  
• Fallbacks are still needed. For high-value purchases, international customers, or legacy workflows, you may still need cards or Direct Debit alongside instant bank rails.
  
• Bank coverage gaps. While most UK current accounts support Faster Payments, some challenger banks or international accounts may not be fully integrated. 

These are important considerations when building your payment strategy and choosing your mix of methods.

Why instant bank payments are strategic

The shift toward instant bank payments isn’t incremental but foundational. It’s a fundamental change in how money moves. With the UK’s open banking market projected to grow at over 26% CAGR through 2030, account-to-account payments are quickly becoming mainstream, seamlessly woven into the way businesses and customers transact.

Expectations have evolved from one-tap pay links and QR checkouts to in-chat payments. So, businesses that embrace real-time bank payment rails are positioning themselves ahead of the curve. They’re not just improving cash flow or cutting costs; they’re creating faster, more transparent payment experiences that reflect how people actually buy today.

For a deeper look at how instant bank payments fit into this broader shift toward flexible, context-aware payments, check out our article: From QR Codes to Checkout Links: Redefining Customer Experience.

Conclusion

Instant bank payments aren’t just speeding up transactions. What used to take days now happens in seconds, giving merchants better cash flow and customers a smoother experience. For UK businesses, that shift turns payments from a back-office process into a genuine advantage.Yes, there are still details to fine-tune like refund flows, bank coverage, fallback options, but the direction is undeniable. The future of payments is instant, secure, and built on trust between banks and businesses. Those who embrace it early won’t just keep up; they’ll set the pace for what customers come to expect next.