Pay by bank moves money straight from your customer's bank account into yours. They approve the payment inside their own banking app, it travels over Faster Payments, and it usually reaches you within minutes. No card is involved and there's no mandate to set up, so what you've got is a single push payment your customer authorises once, for one amount.
One consequence shapes almost everything else. Once a Faster Payment has been sent, it can't be cancelled, so nobody can raise a chargeback against you. That removes a risk you carry on every card transaction, and the same rule leaves your customer with less protection than a card would have given them.
In this article
The short version
- Open Banking Limited describes pay by bank as "A digitally initiated bank transfer embedded into checkout".
- A regulated Payment Initiation Service Provider builds the instruction and your customer approves it in their own banking app.
- Every payment is a separate authorisation. Nothing carries over to next month's invoice.
- Pay.UK says funds are "usually available almost immediately, although they can sometimes take up to two hours", and that "once sent Faster Payments cannot be cancelled".
- No chargeback exists, so a dispute has to be settled between you and your customer directly.
- June 2026 saw 40.16 million open banking payments across 18.81 million user connections.
What is pay by bank?
Open Banking Limited describes pay by bank in a single line: "A digitally initiated bank transfer embedded into checkout." The mechanics behind that line are what decide whether it suits your invoices.
When your customer chooses pay by bank, "a regulated Payment Initiation Service Provider (PISP) connects the retailer to your bank using secure open banking APIs". The PISP never holds your money and never takes it from anyone. It assembles the payment instruction and hands your customer over to their own bank to approve it, using the login and the security they already use for everything else in that app.
What comes out the other end is an ordinary bank transfer over Faster Payments with the account details, the amount and the reference already filled in. That's the difference between pay by bank and putting your sort code at the bottom of an invoice, where the reference is the field most likely to arrive blank or wrong.
Two properties follow from that, and both do a lot of work later on. The payment is a push, so your customer's bank sends money because your customer told it to and you never pull anything. And the instruction is single use, covering one amount on one day, so it's a payment and not a standing authority.
Who authorises what
The sequence, from your invoice to your bank account:
- You send the invoice with pay by bank offered on the payment page.
- Your customer picks it and selects their bank from a list.
- The provider builds the instruction: your account, the amount, the invoice reference.
- Your customer's bank asks them to approve it, in the app, with their normal security.
- The bank sends the money over Faster Payments.
Only one party authorises anything here, and that's your customer, once, for that payment. You're not given standing permission and neither is your provider. If you want to collect the same fee next month you send another invoice and they approve again.
Because the instruction carries the reference instead of a person typing it, the payment usually arrives already matched to the invoice it belongs to. Reconciliation stops being a job for month end. On Adfin an open banking payment settles to you the same day, against T+2 for cards and T+3 for direct debit.
Once it's sent, nobody can pull it back
Pay.UK, the operator of Faster Payments, puts the settlement side plainly. Funds are "usually available almost immediately, although they can sometimes take up to two hours". Then comes the sentence that decides most of the commercial argument: "Due to their real-time nature, once sent Faster Payments cannot be cancelled."
If somebody pays the wrong person or the wrong amount, the route back is the Credit Payment Recovery process, and it depends on the recipient agreeing to return the money. Their bank can ask on their behalf. It can't compel.
For you, that closes off a whole category of loss. The FCA describes the card position as your customer's provider being able to "ask the seller's bank to refund the money", which is "known as the 'chargeback scheme'", with a further Consumer Credit Act 1974 route on credit card purchases over £100 and under £30,000. None of that reaches a bank transfer. Money in your account stays in your account unless you decide to send it back.
Read the same fact from your customer's side and it looks different, and pretending otherwise tends to cost you trust later. Someone paying you this way gives up both of those routes at once. What they keep is the reimbursement regime for authorised push payment fraud, and that covers being tricked into paying a criminal, not a disagreement with you about the work.
So the practical effect is that a dispute lands on your desk instead of your acquirer's. If you sell to consumers or to very small businesses, expect to be asked about it, and answer it straight: the protection is different, and the refund comes from you rather than from a scheme.
How much it's used now
Open Banking Limited's release of 30 July 2026, covering June, gives you the current scale. Open banking has now passed one billion payments and 100 billion API calls in total. June 2026 alone carried 40.16 million payments across 18.81 million user connections, and variable recurring payments grew 6.7% over the month.
The reliability figures matter more if you're deciding whether to put this in front of a client who has never used it. Average API response time was 349ms, and weighted availability across the ecosystem was 99.80%. Your customer taps through to their bank, approves, and comes back. Enough people have now done that at least once that you're less likely to be explaining the whole idea from scratch.
What it does well on an invoice
- Speed into your account. Faster Payments runs "day and night, 365 days per year", so an invoice approved on a Sunday evening is money on Sunday evening.
- Clean references. The instruction carries the invoice reference, so the payment reconciles on arrival.
- No chargeback exposure, and no chargeback fee.
- Predictable cost on a large invoice. Adfin charges 1% + 20p per successful payment, capped at £4 for bank payments, so collecting £9,000 costs the same as collecting £500.
- Room for big amounts. Faster Payments "facilitates real-time payments of up to £1m", although "those organisations offering the service can set their own limits", and published bank limits run from £5,000 to £1,000,000. The ceiling you'll actually meet is your customer's bank, not the scheme.
The pattern in that list is that pay by bank is at its best when a person is ready to pay you now. A deposit before you start work, a final bill someone wants cleared, an invoice being settled while you're on the phone with them.
Where it struggles
The limitation is the same fact as the strength. Your customer has to do something, every time, and nothing you set up in January collects February's fee.
- Recurring fees. A monthly retainer paid this way is twelve separate acts of approval a year and twelve chances to forget. Variable recurring payments are the intended answer to that, but general invoice collection isn't in scope for them yet.
- Anyone slow to open your email. Across Adfin, 42.9% of customer-initiated payments arrive within 24 hours of the request, with a median of 53 hours (Adfin platform data). Behind that median is a tail of invoices nobody has opened.
- Refunds. With no chargeback in the system, a customer who wants money back has to ask you and you have to send it. Handle that slowly and you get a complaint where a card would have given them a process.
- Bank limits. A payment over your customer's own limit gets refused even though the scheme allows far more, and neither of you finds out until they try.
- Customers who prefer cards, for the credit, the points, or the protection you've just read about.
What it costs
On Adfin, bank payments are 1% + 20p per successful payment, capped at £4, with no monthly minimum and no contract. Cards are priced separately, with premium and EEA cards carrying an extra 1% and non-EEA cards 2%.
You'll find a great many pages claiming open banking is dramatically cheaper than card acquiring, usually with a specific percentage attached. No regulator, Pay.UK or Open Banking Limited figure comparing the two has been published, so every version of that claim traces back to a provider's own marketing rather than to independent measurement. We'd rather tell you that than repeat somebody's number.
Compare the two rates you've actually been quoted instead, on the invoice sizes you actually issue, and include the cap. For a business raising a few large invoices a month, a capped fee and an uncapped percentage behave very differently.
Common questions
Is pay by bank the same thing as open banking? Pay by bank is the payment side of open banking. Open Banking Limited describes it as "A digitally initiated bank transfer embedded into checkout", initiated by a regulated Payment Initiation Service Provider connecting to your customer's bank over open banking APIs.
Can an open banking payment be reversed or charged back? No. Pay.UK states that "Due to their real-time nature, once sent Faster Payments cannot be cancelled." The only route back is the Credit Payment Recovery process, which depends on the recipient agreeing to return the money.
How quickly does an open banking payment reach my account? Pay.UK says funds are "usually available almost immediately, although they can sometimes take up to two hours". On Adfin, open banking payments settle to you the same day.
Is open banking cheaper than taking cards? No regulator, Pay.UK or Open Banking Limited comparison has been published, so the widely quoted savings figures come from providers describing their own product. Compare the rates you have been quoted, including any cap, against the invoice sizes you issue.
How many people actually use it? In June 2026 there were 40.16 million open banking payments across 18.81 million user connections, and cumulative payments have passed one billion, according to Open Banking Limited's 30 July 2026 release.
Can I use open banking to collect a monthly retainer? You can send an invoice with a pay by bank option every month, but your client authorises each one separately. For a fee you want collected without your client acting, direct debit is the instrument that exists today.
Sources
- Open Banking Limited — pay by bank (accurate as of August 2026)
This article explains how open banking payments work for business invoicing and is not legal or financial advice. Figures on adoption and settlement are quoted from Open Banking Limited and Pay.UK as published in 2026. Last updated August 2026.
