Pay by bank and account-to-account payments explained
Pay by bank lets a customer pay you straight from their bank account, with no card involved. They choose their bank at checkout and approve the payment in their banking app. In the UK it runs on open banking. A payment initiation service provider (PISP) sends the instruction to the customer's bank. The payment itself normally travels over Faster Payments.
You'll also see it called account-to-account (A2A) payments, open banking payments or instant bank payments. In practice these names usually mean the same thing.
How pay by bank works at checkout
For the customer it's three steps. They choose pay by bank, pick their bank and approve the payment. Behind those steps, four things happen:
- Your checkout creates a payment with your PISP, with the amount and your business account as the payee.
- The customer goes to their bank's app or website, signs in and approves the payment. On a phone this is usually a jump into the banking app and back.
- The bank sends the payment to your account.
- Your PISP tells your system the payment's status so you can confirm the order.
Because the customer approves inside their own bank, they never type card details into your site and you never have to store them. The PISP carries out the regulated part. The guide to what a PISP is covers that in more detail.
How it compares with cards
A card payment passes through your acquirer or payment provider, the card scheme and the customer's card issuer. Each of them has its own fees and rules. A pay by bank payment involves only your PISP, the customer's bank and the payment system between the two banks.
Card payment
- Customer's card
- Instruction: card details
- Acquirer
- Instruction: authorisation
- Card scheme
- Instruction: authorisation
- Card issuer
Pay by bank
- PISP Sends the instruction
- Instruction: payment request
- Customer's bank Customer approves
- Money: Faster Payments
- Your bank account
| Compared on | Cards | Pay by bank |
|---|---|---|
| What the customer enters | Card number, expiry date and security code | Nothing on your site; they approve in their banking app |
| Who's in the chain | Acquirer, card scheme, card issuer | PISP, the customer's bank, Faster Payments or SEPA |
| How you're charged | Interchange and scheme fees, plus your provider's margin | Your PISP's fee, set in your contract |
| When the money arrives | When your acquirer pays out | When the bank sends it to your account |
| Disputes | Chargebacks under card scheme rules | No chargeback scheme; refunds are a new payment |
| Repeat payments | Stored cards and merchant-initiated payments | Variable recurring payments, where the bank and provider support them |
What it costs
A bank payment has no interchange. What you pay is set by your contract with your PISP, for example a fee per payment that falls as your volume moves up its tiers. That makes the contract the thing to compare. If you use more than one PISP, the cheapest one for a given payment can change during the month as each contract moves through its tiers. Unirail records your provider deals and prices every payment under them.
What a business needs to accept pay by bank
- A PISP, or a provider that offers payment initiation in your countries. Check coverage country by country, because one provider rarely reaches every bank you need.
- A business account that can receive the payments, by Faster Payments in the UK or SEPA transfer in the euro area.
- An integration with the PISP's API or SDK, including a bank picker and handling for the customer coming back from their bank.
- Status handling for payments that are pending, completed or rejected. A status can change after the customer returns. Webhooks or an event feed tell you when it does.
- A refund process that sends money back as a new payment, through your PISP if it offers refunds or from your own account.
- Your own compliance checks. The PISP is regulated for the initiation only. Any duties your business already has, such as anti-money-laundering checks if it's regulated, stay with you.
Recurring payments and pay by bank
Each single payment needs the customer's approval. Variable recurring payments (VRP) work from a standing consent. The customer approves a mandate once, with limits such as a maximum per payment and per month. Later payments within those limits go through without a new approval.
In the UK the Competition and Markets Authority required the largest banks to support sweeping VRP. Sweeping moves money between accounts in the customer's own name. VRP for paying other businesses, known as commercial VRP, depends on the bank and the provider supporting it. The guide to open banking in the UK covers both, with the providers that offer each.
Accepting pay by bank through more than one provider
If you accept pay by bank through more than one PISP, Unirail decides which one each payment should use. It weighs the cost under your contracts, the expected speed and the chance of success at that customer's bank. Each decision comes with its reasons. Either your backend calls the PISP with your own credentials, or Unirail calls it with credentials it reads from your vault and holds only in memory.
See which providers cover your countries on the single payments page, or how the pay by bank API routes across them.