In a world where card payments constitute about 60% of the total transactions, Pay by bank is a payment method that moves money directly from a customer’s bank account to a merchant’s account, without a card network sitting in between.
It is also called account-to-account (A2A) payment, or, sometimes, less formally, a bank-to-bank payment. Instead of entering card details, the customer authorizes the transfer through their bank’s app or online banking portal, and the funds move over a bank rail rather than a card scheme. A2A segment, which largely consists of bank-to-bank transfers, is expected to grow over 100% by the end of the current decade.
The mechanism behind most modern pay by bank flows is open banking: regulated technology that lets a merchant’s payment provider securely initiate a transfer from a customer’s account, with the customer’s consent, without the merchant ever seeing the customer’s banking credentials.
How Pay by Bank Works
A typical pay by bank checkout follows a few steps. The customer selects “pay by bank” at checkout and chooses their preferred bank from a list. They are then redirected to their bank’s own login screen rather than a page hosted by the merchant, and authenticate there. The customer reviews the payment amount and confirms the transfer. The bank sends the funds to the merchant, often within seconds if the transfer runs over a real-time payment rail.
Because authentication happens inside the customer’s own banking app, the merchant never handles card numbers, CVVs, or stored payment credentials. This shifts a meaningful share of fraud and compliance exposure away from the merchant.
Pay by Bank vs. Card Payments
The core difference between card and bank payments is the rail they use. Card payments route through a four-party (or three-party) card network, including issuing bank, card scheme, acquirer and merchant. It has an interchange fee attached at each transfer step. Pay by bank payments move directly between the payer’s and payee’s bank accounts, typically over an open banking API and a real-time payments rail, cutting out the card network layer entirely.
That structural difference has practical consequences:
- Cost. Card interchange typically runs in the 2%–3.5% range, while bank transfer rails cost merchants a fraction of that per transaction.
- Speed. Real-time payment rails can settle in seconds, compared with the multi-day settlement cycles common to card processing.
- Chargebacks. Card payments carry a formal chargeback mechanism, while bank transfers generally do not. It lowers dispute-related costs for merchants but also removes a consumer protection card users are used to, being kind of a double-edged sword.
- Familiarity. Cards benefit from decades of consumer habit and built-in loyalty or rewards programs that most pay by bank products do not yet replicate. Creating rewards programs for A2A transfers as a payment method is an untapped opportunity for merchants, said Keith Olson, VP ACH & Open Banking at Nuvei, back in 2023. So far, not too many providers have followed his advice.
The Role of Open Banking and A2A Rails
Pay by bank did not appear on its own. It is a use case built on top of open banking regulation and account-to-account infrastructure. In the EU and UK, PSD2 and equivalent open banking frameworks require banks to expose secure APIs that let licensed third parties initiate payments on a customer’s behalf.
In the US, a patchwork of bank-led networks (such as FedNow and The Clearing House’s RTP network) and private open banking API providers plays a similar role, though without a single unifying mandate.
Underneath the customer-facing “pay by bank” button sits the broader account-to-account payments infrastructure. It comprises real-time payment schemes, open banking connectivity providers, and the bank networks that actually move the money.
Markets with strong domestic A2A schemes, e.g. UPI in India, Pix in Brazil, iDEAL in the Netherlands, BLIK in Poland, show what happens when this infrastructure matures: A2A payments become a default checkout option rather than a niche one. Current share of UPI in Indian digital payments, for example, is now 85%. That impressive result was achieved in ten years. Pix now is used by 93% of Brazil adults and is projected to cover half of local e-commerce transactions by 2028.
Why Pay by Bank Is Growing
Growth in pay by bank tracks the broader expansion of A2A payments. Juniper Research projected in September 2025 that global A2A transaction value will rise 113% over five years, from $91.5 trillion in 2025 to $195 trillion in 2030, driven in part by new real-time payment rail rollouts and value-added services such as Variable Recurring Payments.
Separately, FIS has reported that A2A payments already lead as the top online payment method in several markets, including Finland, the Netherlands, and Poland, with A2A projected to grow at a 13% compound annual rate through 2026. For more detail on the underlying transaction volumes across major A2A schemes, see PaySpace Magazine Global’s A2A Payment Statistics 2026 breakdown.
Regulatory pressure adds another growth driver. The EU’s Instant Payments Regulation, which made SEPA Instant transfers mandatory across the bloc in 2025, is widely cited by industry participants as a catalyst for A2A adoption in 2026.
Benefits for Merchants
Merchants adopting pay by bank generally point to three advantages: lower processing costs compared to card interchange, faster access to funds thanks to real-time settlement, and reduced fraud and chargeback exposure since the bank, not the merchant, handles authentication. For high-ticket or B2B transactions, the ability to move large sums instantly without card network transaction caps is an added plus.
Benefits for Consumers
For consumers, the appeal is control and security. Because a bank transfer does not require handing card details to a merchant, there is no card number for a breach to expose. Authentication happens inside a banking app the customer already trusts, using whatever multi-factor login their bank requires. Payments also tend to settle immediately, which matters for use cases like bill pay, marketplace payouts, or peer-to-peer transfers.
Challenges and Adoption Barriers
Despite all the benefits, Pay by bank is not yet a card replacement in most markets. Consumer awareness slows adoption down in economies without a dominant domestic scheme. The US is the clearest example. There, FedNow and RTP coverage is expanding, but A2A checkout habits are still forming.
The lack of a chargeback mechanism is a genuine trade-off as well. Refunds require merchant cooperation rather than an automatic dispute process. And redirect-based flows, where a customer leaves the merchant’s page to authenticate with their bank, can introduce checkout friction and drop-off if not designed carefully.
Pay by Bank Providers to Know
Open banking payment infrastructure is supplied by a mix of bank consortiums and private fintechs. Examples include Trustly, Volt, and MyBank in Europe, Bizum in Spain, and Vipps MobilePay in the Nordics, alongside bank-run real-time rails like FedNow and RTP in the US. Per PaySpace Magazine Global estimations, together major real-time payment systems which are mostly A2A could process about $9.5 trillion in value annually, which is close to Mastercard’s processing potential.
FAQ
Is pay by bank safe? Yes. Authentication happens inside the customer’s own banking app using the bank’s existing security controls, and the merchant never receives card numbers or login credentials.
Is pay by bank the same as A2A payments? Pay by bank is a consumer-facing checkout use case built on account-to-account payment infrastructure — the terms are often used interchangeably.
Does pay by bank support refunds? Refunds are possible but depend on the merchant initiating a return transfer, since bank payments do not carry an automatic chargeback mechanism like cards.
Which countries use pay by bank the most? Adoption is strongest in markets with a dominant domestic A2A scheme, including the Netherlands (iDEAL), Poland (BLIK), and India (UPI).
