Pay by Bank for Merchants: Everything you need to know in 2026
Pay by Bank for Merchants: Everything you need to know in 2026
As transaction costs rise and customer expectations evolve, large-scale merchants are under growing pressure to rethink their payment infrastructure. Pay by Bank, also known as account-to-account (A2A) payment, is rapidly emerging as one of the most commercially compelling alternatives to card-based payment rails. For merchants processing high volumes, the financial and operational advantages are substantial.
This guide breaks down everything business leaders and payments decision-makers need to know: what Pay by Bank is, how it works, the measurable benefits it delivers, and how to evaluate it against your current setup.
What Is Pay by Bank?
Pay by Bank is a payment method that allows customers to authorise a direct transfer from their bank account to a merchant, without a card network acting as the intermediary. Instead of entering card details at checkout, the customer is redirected to their banking app to approve the payment.
This is made possible through open banking regulations. Across the EU and UK, the PSD2 mandate requires banks to provide secure, standardised API access to licensed third parties, known as Payment Initiation Service Providers (PISPs). These PISPs sit between the merchant and the customer’s bank, handling the instruction to move funds.
The result is a payment journey that eliminates card networks like Visa and Mastercard from the equation entirely, along with the interchange fees that come with them. However, it is important to note that Pay by Bank should not entirely replace card payments, but rather offers a more cost-effective alternative that can be added to the payment mix, best suited to high value payments in particular.
How Does Pay by Bank Work?
The mechanics of Pay by Bank differ meaningfully from traditional card processing, and understanding the flow matters when assessing integration and user experience implications.
Here is what happens at the point of sale:
- Checkout initiation: The customer selects “Pay by Bank” as their payment option. This is presented as an option on a web checkout or included within a payment request link sent by the merchant to the buyer.
- Consent and redirection: The merchant’s payment provider, Prommt in this case, redirects the customer to their bank’s app or online banking portal.
- Strong Customer Authentication (SCA): The customer authenticates using their bank’s security protocols, typically biometrics or a PIN, and reviews and approves the payment amount.
- Payment instruction sent: The PISP sends a payment instruction directly to the customer’s bank via secure open banking APIs.
- Funds transferred: The bank initiates the transfer from the customer’s account to the merchant’s account via the Faster Payments network in the UK, or SEPA Instant across Europe.
- Confirmation: Both merchant and customer receive real-time confirmation of the transaction.
Critically, the merchant never handles or stores sensitive customer financial data.. Authentication is handled entirely by the customer’s own bank using existing, trusted security frameworks.
What Are the Benefits of Pay by Bank?
For high-volume merchants, the commercial case for Pay by Bank is compelling across several dimensions.
Significant Cost Reduction
Card processing fees typically range from 0.3% to 1.5% or more per transaction, depending on card type, geography, and merchant category code. For merchants processing tens or hundreds of millions in annual revenue, this represents a material cost line.
Pay by Bank fees are typically lower, often a fraction of equivalent card costs. Removing interchange from the equation entirely changes the economics of high-volume processing. According to Prommt clients over the last year, bank-to-bank options reduce card fees and settlement delays in ways that translate directly to improved margins. At scale, the savings can run to seven figures annually.
Elimination of Chargebacks
Chargebacks are one of the most operationally damaging aspects of card-based payments. They are time-consuming to dispute, carry penalty fees, and beyond a certain threshold can trigger review or termination of merchant accounts.
Pay by Bank payments are bank-authorised, push-payment transactions. The customer instructs their bank to send funds; the payment is not a pull. This structure means traditional card chargebacks do not apply. Disputes are handled under different frameworks, and the fraud liability profile is fundamentally different and significantly better for merchants.
Improved Cash Flow
Settlement times for card payments can range from one to three business days, depending on the acquirer and payment processor. Pay by Bank payments settle via instant payments infrastructure, operating around the clock, 365 days a year.
For merchants managing working capital, supplier payments, or high inventory turnover, faster settlement is a direct operational advantage.
Higher Conversion Rates for the Right Audience
For merchants whose customers are already comfortable with mobile banking, which for most sectors in 2026 represents the vast majority of their base, Pay by Bank offers a frictionless, simple checkout. No card details to enter. No stored card data to manage. Just authenticate and approve.
Stronger Fraud Profile
Because Pay by Bank leverages the bank’s own authentication infrastructure and Strong Customer Authentication, the fraud attack surface is dramatically reduced. There are no card details to compromise in a data breach and no card-not-present fraud vectors.
Is Pay by Bank Instant?
This is one of the most common questions merchants raise, and the answer requires a small but important distinction.
Payment initiation is immediate.
Once the customer approves the transaction in their banking app, the payment instruction is sent in real time. In the UK, the Faster Payments network typically settles funds within seconds, well under two minutes in the vast majority of cases.
However, “instant” in the context of merchant settlement also depends on your payment provider’s reconciliation processes. Some providers offer real-time confirmation with same-second settlement notification; others batch their reconciliation. When evaluating providers, it is worth clarifying whether you receive funds in real time or whether there is a provider-level settlement lag on top of the bank transfer itself.
For practical purposes, in most implementations pay by bank is functionally instant from the customer’s perspective, and settlement to the merchant is faster than card, often same-day or better.
How Safe Is Pay by Bank?
Security is a legitimate concern for both merchants and their customers, and it is one of the areas where pay by bank performs exceptionally well.
For customers, Pay by Bank is built on the same authentication infrastructure they use for their everyday banking. The customer reviews the exact payment amount and recipient before approving. There is no risk of their payment data being skimmed or stored by a third party.
For merchants, the security profile is similarly strong. Because you no longer have to handle card data, your PCI DSS scope is substantially reduced. The attack vectors that expose card-processing merchants, including point-of-sale skimming, card data breaches, and BIN attacks, are irrelevant to Pay by Bank.
For businesses that still rely on manual bank transfers, Pay by Bank is a significant step forward. Traditional bank transfers require the customer to log into their banking app separately, manually enter account details, sort codes, and reference numbers, and hope that no errors are made along the way. The process is slow, friction-heavy, and leaves room for costly mistakes. Pay by Bank eliminates all of that. The payment is initiated directly at checkout, the details are pre-populated, and the customer simply authenticates and approves.
The primary fraud risk in bank transfer payments historically has been authorised push payment (APP) fraud, where a customer is socially engineered into approving a fraudulent transfer. However, for merchant-initiated payments at legitimate checkouts, this risk is minimal: the customer can see exactly who they are paying and for what amount before approving.
Is Pay by Bank Right for Your Business?
Pay by Bank is not a universal replacement for cards. The priority for any merchant is to get paid, which is why offering both card and bank payments on the same checkout is always the recommended starting point rather than switching to pay by Bank exclusively.
That said, smart orchestration controls mean merchants can set value thresholds to drive cost savings automatically. Above a set transaction value, for example £500, pay by bank is presented as the only payment method. Below that threshold, the merchant can choose to present both card and bank, or card only. The logic runs in the background and the thresholds are entirely configurable.
There is also a simpler lever available: defaulting to pay by bank as the primary option at checkout increases bank payment completion by 15%, as customers must make a conscious choice to select card rather than the other way around.
For most large merchants who work through this, the answer points in the same direction: pay by Bank deserves serious consideration as a primary or complementary payment rail.