As 2025 unfolds, a growing number of merchants and consumers are embracing “Pay by Bank” — a payment method allowing users to pay directly from their bank accounts, bypassing traditional card rails.
Spearheaded by fintech leaders, Pay by Bank is increasingly being positioned as the most secure, cost-effective, and resilient payment solution for the future.
The battle at the checkout has intensified.
Once dominated by credit and debit cards, the space is now seeing a surge in alternative methods.
Pay by Bank: Compelling Benefits
With Pay by Bank, the benefits are compelling: lower transaction fees, faster settlement times, reduced fraud risk, and a smoother checkout experience for customers.
By removing intermediaries, merchants gain operational efficiencies, while consumers enjoy instant refunds and biometric security, enhancing trust and satisfaction.
In the UK alone, Pay by Bank usage has exploded to 27 million transactions monthly, with almost 9 million active users.
Notably, 80% of e-commerce merchants with revenues exceeding £1 million are either implementing or planning to introduce Pay by Bank.
This adoption trend is not isolated; it mirrors broader growth patterns in Europe and beyond.
Why Now?
The reasons for this momentum are manifold.
From a security standpoint, Pay by Bank leverages strong customer authentication (SCA) and pre-populated payment details, making unauthorised transactions virtually obsolete.
Unlike card payments, no sensitive information is shared with merchants, reducing the risk of data breaches and fraud.
Furthermore, the speed advantage is considerable.
Refunds, traditionally taking days through card schemes, can now occur within seconds, a feature that directly influences customer loyalty and satisfaction.
With refund times being a key determinant in shopper retention, Pay by Bank’s efficiency offers a critical competitive edge for merchants.
Benefits for Merchants
Major brands are already reaping the benefits.
Travel giant lastminute.com reported a 20% increase in average order value after introducing Pay by Bank, while Papa Johns noted a reduction in payment costs by over 40% alongside improved customer retention.
For both, Pay by Bank also offered vital resilience during the infamous Crowdstrike outage in 2024, when card payments failed globally, but Pay by Bank transactions continued unhindered.
Variable Recurring Payments
Beyond one-off payments, 2025 is also poised to be a breakthrough year for Variable Recurring Payments (VRP), often referred to as “Bank on File.”
Thanks to new regulatory backing from the FCA (in the UK), VRP will allow consumers to set up flexible, variable repeat payments directly from their bank accounts — an innovation expected to challenge the dominance of cards and Direct Debits in subscriptions and utilities.
A Centralised Scheme
However, the path forward is not without challenges.
The absence of a centralised scheme has sometimes limited Pay by Bank’s full potential.
While its decentralised, API-driven architecture spurred innovation, it has also meant inconsistent investment by banks in Open Banking interfaces.
To address this, the UK is now moving toward establishing an independent central operator, tasked with creating a unified commercial framework.
This operator will standardise rules for recurring payments, dispute management, and liability allocation, enhancing the system’s reliability and scalability.
Critics have raised concerns over consumer protection, particularly the lack of traditional chargebacks.
Yet proponents argue that Pay by Bank aligns with modern e-commerce dynamics, where merchants fiercely compete on customer service and refunds, rendering chargebacks increasingly obsolete.
Moreover, research highlights that chargebacks are now a primary channel for refund fraud, a growing cost burden on merchants and consumers alike.
International comparisons offer further reassurance.
In the Netherlands, iDEAL — a Pay by Bank system — accounts for 73% of all online purchases, thriving without chargebacks. Spain’s Bizum has similarly flourished.
Such examples underscore that mass adoption without card-like protections is not only possible but preferable in a modern, trust-driven retail environment.
Pay by Bank represents not just an evolution but a fundamental reimagining of how digital payments should work — faster, fairer, and safer for all participants.
As regulators, merchants, and fintech providers collaborate to embed Pay by Bank deeper into everyday transactions, 2025 could well mark the tipping point.
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