Pay by Bank
Pay by Bank checkouts require precise device detection and accurate app redirection to prevent conversion drop-off. Cardflo provides the orchestration layer to present these interfaces correctly, ensuring high completion rates across both mobile and desktop payment environments.
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Cardflo supports Pay by Bank options, allowing customers to complete transactions directly from their bank accounts. This method offers a secure and efficient alternative to card payments, reducing processing fees and potential chargebacks.
It provides a streamlined checkout flow, enhancing customer convenience and trust.
Implementing Pay by Bank options through Cardflo’s multi-acquirer network lowers processing overheads and virtually eliminates chargeback risk. Merchants benefit from instant, secure bank transfers, enhancing financial stability and reducing operational burdens.
Pay by Bank overview
Pay by Bank, often referred to as account-to-account (A2A) payments, utilises open banking infrastructure such as PISP (Payment Initiation Service Provider) frameworks to facilitate transfers directly from a consumer’s bank account to a merchant’s account.
This mechanism bypasses traditional card schemes, including the associated interchange and scheme fees, by moving funds through domestic clearing systems like Faster Payments in the UK or SEPA Instant in the Eurozone.
From a technical standpoint, the gateway initiates an authorisation request which the user then confirms through their banking application via biometric or PIN authentication. This process satisfies Strong Customer Authentication (SCA) requirements by design.
Because it lacks the pull-based nature of direct debits or the credit-based structure of card networks, it reduces the complexity of payment failures. Merchants often prioritise this method to manage operational costs and mitigate the administrative burden of dispute management, as these transfers are generally irrevocable once authorised by the payer through their bank.
How pay by Bank works
Payment initiation at checkout
At the point of sale, the customer selects the bank transfer option. The payment gateway generates a request and prompts the customer to select their financial institution from a list. This step creates a secure link between the merchant’s checkout and the bank's API, ensuring data integrity during the redirection phase.
Customer authentication
The customer is redirected to their mobile banking app or online portal. Using existing credentials, such as biometrics or a security passcode, they authorise the transaction. This satisfies SCA mandates without the friction of manual card entry, as the bank verifies the identity and confirms the availability of funds.
Real-time fund transfer
Upon authorisation, the bank initiates a push payment via local rails. Unlike card payments that involve multiple intermediaries for authorisation and settlement, these funds move directly from the payer's account towards the merchant's account or a designated settlement account, often using instant payment networks for rapid delivery.
Instant transaction confirmation
The merchant receives an immediate response via webhook or API callback indicating the status of the transfer. This confirmation allows for the instant release of digital goods or the commencement of physical shipping workflows, matching the speed of a successful card authorisation while ensuring the funds are final.
Why pay by Bank matters
Reduction in processing overhead
By avoiding the card-scheme fee structures and interchange rates, businesses can significantly lower their total cost of acceptance. This is particularly relevant for high-value transactions where percentage-based card fees become substantial. The simplified value chain reduces the number of entities taking a margin on each transaction, directly improving the merchant's net margin per sale.
Mitigation of dispute risk
Card schemes allow for chargebacks under various reason codes, creating financial liability for merchants months after a sale. Pay by Bank transactions are generally pushed by the payer, meaning there is no equivalent chargeback mechanism. This reduces the cost of dispute management and prevents the loss of revenue associated with friendly fraud or card-not-present disputes.
Pay by Bank use cases
Bank app checkout for travellers
Mobile shoppers selecting pay by bank can abandon checkout when the redirect gives little warning, opens the wrong banking route or loses basket context. Cardflo helps merchants present clear bank selection, preserve order references and return customers to a confirmation screen after biometric authentication in their banking app.
Desktop checkout QR handoff
Desktop shoppers may prefer approving a bank payment on their phone rather than continuing through a browser-based authentication journey. Cardflo supports checkout flows that display a time-limited QR code, retain the basket on the original screen and update the order status once approval is completed in the banking app.
Direct bank payments for subscriptions
Consumers can hesitate when a checkout presents an unstructured list of banks, unfamiliar logos or no clear route for finding their provider. Cardflo helps merchants optimise bank search, ordering, mobile display and fallback messaging, while measuring selection drop-off separately from authentication and return-to-merchant completion.
Grocery basket total changes
Online grocery baskets can change after picking, creating confusion when substitutions or unavailable items alter the amount shown before bank approval. Cardflo helps supermarkets display the payable total clearly, align payment status with fulfilment updates and route customers back to an accurate order confirmation after banking app authentication.
Pay by Bank by the numbers
Merchants often observe these savings on high-value transactions by bypassing card network interchange fees and ad-valorem scheme charges.
In regions supported by instant payment rails like UK Faster Payments, this is the typical window for fund transfer confirmation.
This range reflects industry benchmarks for customers who successfully redirect to their banking app and complete biometric verification.
Methodology: these figures are illustrative ranges drawn from published industry data and observed merchant cohorts, not guarantees. Actual results depend on your risk profile, card mix, geography and acquiring setup, and are confirmed only in your own pricing and approval terms.
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Talk to our team about a live rollout across our acquirer partners' rails.
What you get with Pay by Bank
- Eliminate interchange and scheme fees by routing transactions through direct bank-clearing networks
- Reduce the operational burden of chargeback management through irrevocable push-payment architecture
- Support compliance with PSD2 and SCA via native bank-level biometric authentication flows
- Improve cash flow with settlement occurring via local instant payment rails like Faster Payments
- Decrease payment abandonment by removing the need for manual entry of long card numbers
- Enable higher transaction limits for B2B and high-value consumer retail purchases
- Verify the presence of sufficient funds in real-time before confirming an order
- Reduce the risk of card-not-present fraud and stolen credential usage at checkout
- Standardise payment flows across diverse European banking markets using open banking protocols
- Automate bank reconciliation through unique transaction references generated at the point of initiation
A short scoping call, then a written plan for your MIDs.
Questions about Pay by Bank
Are Pay by Bank payments as secure as traditional card transactions?
Yes, they are often considered more secure because the merchant never handles sensitive payment credentials. The transaction is authorised within the user's own banking environment, utilising the bank's native security protocols, such as biometric scanning or hardware tokens.
This alignment with the bank's own security stack reduces the risk of credential theft during the checkout process and ensures that the identity verification process is managed by the institution that holds the user's funds, fulfilling all necessary regulatory security requirements.
How should pay by bank checkout status messages reduce consumer abandonment?
The interface should distinguish clearly between bank selection, authentication in progress, payment confirmation and a cancelled or timed-out journey. After consumers leave the merchant site for their banking app, the checkout should preserve the basket and display a concise waiting state on return.
Cardflo provides payment status data that merchants can map to accurate on-screen messages, avoiding premature success pages or vague errors that encourage duplicate payment attempts.
What is the typical settlement timeframe for these transactions?
Settlement times vary depending on the specific infrastructure used. In the United Kingdom, payments typically move via Faster Payments, which often results in settlement within seconds or minutes.
In the European Union, the SEPA Instant Credit Transfer scheme facilitates similar near-real-time settlement. However, if a bank does not support instant rails, it may fall back to standard SEPA Credit Transfers, which can take one business day.
This is generally faster than the standard T+2 or T+3 cycles typical of acquirer settlements for card payments.
Is a Merchant Identification Number (MID) required for Pay by Bank?
Technically, a traditional card MID provided by an acquirer is not used for account-to-account payments. Instead, the merchant or their PSP will use an account held within the banking system or a specialised PISP licence to route funds.
While the merchant may still have a profile within a payment gateway to manage these transactions alongside cards, the underlying financial plumbing is separate from the card-acquiring environment, meaning acquirer-specific fees and rules do not apply.
Do customers need to download a separate app to use this method?
No, customers do not need extra software. The flow relies on the banking apps already present on their devices.
When a customer selects their bank during the checkout process, the mobile browser typically uses deep-linking to open their bank's mobile application directly.
If they are on a desktop, they may be presented with a QR code to scan with their phone or a secure login page for their online banking portal.
Does this payment method support recurring billing or subscriptions?
It can. While many implementations are for one-off payments, open banking standards such as Variable Recurring Payments (VRP) in the UK are designed specifically to handle recurring transactions.
These provide a digital alternative to Direct Debits, allowing for more control over payment timing and amounts. For merchants, this means they can manage subscriptions with the same low-cost, high-security benefits of account-to-account transfers, though adoption of VRP varies by region and bank.
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