Pay by Bank is starting to feel like the next big shift in how we move money. By letting people make an instant payment straight from their bank account, it sidesteps card networks entirely.
Merchants pay fewer fees, customers get faster checkouts, and banks regain a role they’d quietly lost to payment processors.
It’s not perfect yet, no financial technology ever is, but it’s changing how both sides of a transaction think about value, trust, and control.
Hiring fintech software developers familiar with these kinds of developments can help you get ahead in the highly competitive financial services industry.
At Trio, we provide these specialists from countries like Brazil, Argentina, Chile, and Mexico, who are familiar with global regulatory environments, so that you can get high-quality development as cost-effectively as possible.
Understanding Pay by Bank
To see where Pay by Bank fits into the broader payments space, it helps to understand how it actually works and what makes it different from the card system that’s dominated for decades.
What Is Pay by Bank?
Pay by Bank is a digital payment method that moves money directly from one bank account to another.
It uses open banking APIs to connect the customer’s bank with the merchant’s system, skipping credit cards altogether. Instead of typing in numbers or waiting for third-party verification, the customer simply authorizes the payment inside their own banking app.
In practice, it feels a lot like an instant bank transfer, but with the speed and polish of an online payment.
For merchants, it means lower transaction fees and faster settlement. For consumers, it offers transparency and control, no card data to store, and no middlemen to approve each step.
How Pay by Bank Works
From the customer’s point of view, paying by bank account is straightforward.
At checkout, they select Pay by Bank, choose their bank from a short list, and confirm the payment in their usual banking app. Within seconds, the funds arrive in the merchant’s account.
Behind the scenes, Payment Initiation Service Providers (PISPs) handle the connection between the two banks.
This process, built under the EU’s Payment Services Directive (PSD2), uses open banking APIs to initiate and confirm each payment.
Because authentication happens within the customer’s bank, the risk of fraud or chargebacks drops sharply compared with traditional card payments.
The Role of Open Banking APIs
APIs are the connective tissue of the Pay by Bank model.
They define how banks expose secure payment and account data endpoints to licensed third parties.
Within Europe, these standards have become increasingly uniform, but outside the EU, the story is patchier. Some markets rely on upgraded ACH rails; others use local real-time systems.
Despite these variations, open banking payments appear to be the clearest path toward truly global account-to-account transactions.
Why Pay by Bank Is Rising Now
The recent wave of Pay by Bank reflects a wider frustration with slow, expensive, or opaque payment systems, and a growing expectation that money should move as quickly as messages.
Real-Time Payment Rails and Market Growth
Real-time payment networks have set the stage for Pay by Bank to work at scale.
SEPA Instant in Europe, Faster Payments in the UK, RTP in the U.S., and Pix in Brazil are all examples of rails that settle transactions within seconds.
These networks make it practical for merchants to accept A2A payments without worrying about delays.
EU regulators have pushed hard for instant payment regulations, requiring banks to make real-time transfers widely available.
The result is a financial environment where Pay by Bank can finally compete with card payments on both speed and reliability.
Consumer Demand for Instant, Low-Fee Transactions
People expect instant everything: messages, streaming, and delivery. Payments are no exception.
Many now prefer using their own bank’s app rather than entering card details or trusting a third-party wallet.
In the time we’ve been in the industry, we’ve constantly been reminded how convenience, trust, and reduced costs are deciding factors for both businesses and consumers. Sometimes even more than the technology itself.
Merchant Push for Lower Payment Costs
Merchants have their own motivation.
Rising card fees, complex dispute rules, and slow settlements eat into margins.
Pay by Bank offers a simpler route: lower costs, faster cash flow, and fewer intermediaries.
We have seen, first-hand, how checkout conversion has increased once they added Pay by Bank as a payment option.
Global Adoption and Key Markets
Although the movement started in Europe, the appeal of Pay by Bank is spreading quickly through other regions experimenting with open banking and instant transfers.
Europe and the UK: Leading the Way
The UK and Europe are still ahead, largely because open banking regulation gave them a head start.
In markets like the Netherlands and Sweden, where online banking was already a habit, Pay by Bank payments have blended smoothly into e-commerce.
In the UK, major banks are legally required to comply with requests from regulated third-party PISPs, and some large retailers already rank Pay by Bank among their top three payment methods for cost savings.
The U.S., LATAM, and APAC: Building Momentum
Elsewhere, things are picking up.
The U.S. is modernizing its Automated Clearing House (ACH) system through networks like RTP and FedNow.
Brazil’s Pix has turned real-time payments into a national utility.
India’s UPI is now processing billions of transactions per month.
Across Asia and Latin America, this kind of bank-led innovation is making Pay by Bank adoption feel less like an experiment and more like the logical next step in the payments space.
Benefits of Pay by Bank
The benefits touch nearly every part of the payments chain, though not always in the same way.
For Businesses
Merchants often notice the financial upside first. Lower processing fees and faster settlements help stabilize cash flow.
A direct A2A payment cuts out card networks and reduces administrative overhead tied to refunds or reconciliation.
Some businesses also find that customers who use Pay by Bank are less likely to abandon their checkout midway.
For Consumers
Consumers gain a sense of transparency and control. There’s no need to hand over card details to unfamiliar sites or juggle different wallets.
Payments also happen directly within their bank’s app, using the same security methods they already trust. Their familiarity with the UI makes the checkout process more seamless, too.
It’s a small but noticeable shift in confidence when the payment experience feels native rather than bolted on.
For Financial Institutions and PSPs
Banks and payment service providers aren’t just spectators. Many see Pay by Bank as a chance to reclaim part of the digital payment flow they lost to card brands and fintech intermediaries.
By offering open banking payment APIs, they can build new revenue lines, like variable recurring payments, invoice payment tools, and smarter fraud protection services.
Challenges to Overcome
Even with strong momentum, Pay by Bank still faces barriers that could slow its global rollout if left unresolved.
Regulatory Fragmentation and PSD3 Transition
PSD2 established the groundwork for open banking, but national differences in interpretation have created inconsistencies.
The upcoming PSD3 framework aims to fix that, at least in European markets, yet questions remain about how uniformly it will be enforced.
Other regions, especially the U.S., still rely on voluntary standards rather than regulation, which can make interoperability tricky.
Interoperability and Global Standards (ISO 20022, Open Banking Profiles)
Interoperability is at the heart of global payments. Without shared data formats like ISO 20022, an A2A payment in one country can’t easily travel across borders.
Efforts to standardize open banking profiles are helping, though progress is uneven.
For Pay by Bank to scale globally, banks and regulators will have to agree on how transaction data and authentication protocols align.
Technical and Legacy Integration Barriers
Adopting a new payment method rarely fits neatly into old systems. Many merchants still rely on gateways built around card logic, not API calls.
In these cases, integrating Pay by Bank will require rewriting parts of checkout flows, reconciling payments differently, and monitoring new types of errors.
Some PISPs are solving this by offering “drop-in” SDKs, but for legacy merchants, the change can still feel daunting.
If you are in this situation, specialists, like the kind we offer at Trio, may be the solution for you.
These cost-effective experts can be provided within a couple of days, instead of months. We also provide the resources to onboard the developers, taking the pressure off your internal systems.
Consumer Awareness and Trust
Finally, awareness is uneven. While many European consumers already use open banking features daily, others remain skeptical.
Pay by Bank may look unfamiliar compared to credit or debit cards, and habits take time to shift.
Education around security, data privacy, and refunds will likely play a big role in mainstream adoption.
The Future of Pay by Bank and Open Banking
The future of Pay by Bank appears to be tied to how far open banking and digital identity frameworks evolve.
Variable Recurring Payments and Subscription Models
Variable Recurring Payments (VRPs) are one of the clearest signs of progress.
They allow users to authorize flexible subscription-style payments directly through their bank, skipping traditional direct debits.
Businesses see this as a way to modernize billing while giving customers more control over limits and cancellations.
Request-to-Pay and Smart Invoice Innovations
Another trend worth watching is request-to-pay. It lets a merchant or service provider send a payment request straight into a customer’s banking app.
The customer reviews it, approves, and the money moves instantly.
It’s particularly useful for invoice payments and small business collections that currently rely on clunky manual transfers.
AI in Fraud Detection and Payment Routing
As transaction volumes grow, AI tools are being used to detect suspicious behavior and route payments more intelligently.
Rather than just flagging anomalies, these systems can learn which rails (SEPA Instant, RTP, or others) offer the best balance between cost, speed, and reliability for a given transaction.
Toward Cross-Border Instant Payments and Digital Identity
In the longer run, Pay by Bank could merge with digital identity infrastructure to enable secure, cross-border instant payments.
Some predict that by 2030, card dominance will begin to fade as account-to-account payments become a preferred global payment option. It may not happen overnight, but the direction seems fairly clear.
How Businesses Can Offer Pay by Bank
For companies considering whether to add Pay by Bank, the setup is getting simpler each year, thanks to better tooling and API providers.
Partnering With PISPs and API Providers
Most merchants don’t deal directly with hundreds of banks. They work through a PISP or aggregator that handles compliance, connectivity, and reporting.
Choosing a reputable partner with good API uptime and transparent pricing can make or break the experience.
Integrating Pay by Bank Into Web and Mobile Checkout
Adding Pay by Bank usually involves embedding a button or redirect flow at checkout. When the customer selects it, they’re guided to their bank’s interface to confirm the payment.
The merchant receives instant confirmation once the transaction clears.
Some merchants experiment with showing expected processing times or loyalty perks to encourage adoption.
Ensuring Compliance and Data Security
Compliance and security remain non-negotiable.
Merchants should verify that providers follow PSD2 and data protection laws, apply strong customer authentication, and handle account data responsibly.
It’s worth investing in transparent consent screens and clear refund policies to reassure customers trying the method for the first time.
Conclusion
Pay by Bank is no longer a fringe idea; it’s becoming part of mainstream digital commerce. Connecting directly to the payer’s bank account through open banking APIs makes online payment faster, cheaper, and often safer.
There are still gaps to close: uneven regulations, limited awareness, and technical growing pains.
But the momentum feels real. Across Europe, the UK, and parts of LATAM and Asia, merchants and consumers are already proving that account-to-account payments can compete with credit cards.
Given how quickly the payments industry evolves, it wouldn’t be surprising if Pay by Bank quietly became the default way to pay within the decade. Are you ready to integrate these solutions into your products while staying compliant with ongoing shifts in compliance?
Having the right people on your team can make all the difference. If you are interested in getting Trio’s fintech experts on your team, get in touch!
FAQs
What is Pay by Bank?
Pay by Bank is a payment method that lets users send money directly from their bank account via open banking APIs instead of using credit cards.
Is Pay by Bank cheaper than card payments?
Yes, usually Pay by Bank is cheaper than card payments. Since there are no traditional card networks or interchange fees involved, transaction costs tend to be lower for merchants.
How secure is Pay by Bank?
Pay by Bank is highly secure because payments are verified by the customer’s own bank using strong authentication methods under PSD2.
Can Pay by Bank support recurring or subscription payments?
Yes, Pay by Bank can support recurring or subscription payments. Variable Recurring Payments (VRP) enable subscription-style models without the limitations of traditional direct debit systems.
