The Evolution of Pay by Bank: A New Era in Payment Solutions

Pay by Bank (PBB), also known as account-to-account (A2A) payments, has emerged as a compelling alternative to traditional card-based payment methods, as stated in Fintech Futures. Leveraging banking rails, PBB offers reduced processing fees for merchants and real-time settlement benefits for banks. Despite its promise, widespread adoption has faced hurdles, primarily due to inconsistent user experiences and limited mainstream awareness.

PBB’s progress has been steady but slow. Initially, adoption was hampered by the varying quality of open banking APIs, which affected user experiences. As noted in the APImetrics report (2022–23), discrepancies in API performance created significant barriers to widespread usage. However, banks have since recognized the commercial potential of high-quality open banking APIs, leading to notable improvements in performance and reliability.

E-commerce has been a surprising early adopter of Pay by Bank, even as it competes with traditional payment options like cards, digital wallets, and Buy Now, Pay Later (BNPL). According to Omdia’s IT Enterprise Insights 2025 Survey, 37% of payment issuers and acquirers prioritize «new payment services leveraging open banking APIs.» Merchants, too, are drawn to PBB’s promise of lower processing fees, as evidenced by early adopters like JD Wetherspoon, Just Eat, Ryanair, and Farfetch.

While merchants increasingly see the potential for PBB to reduce costs and eliminate chargebacks, consumer adoption remains a challenge. Changing consumer payment habits is notoriously difficult, with payment behaviors rooted in convenience and familiarity. A famous study by UCL revealed it takes an average of 66 days to form new habits, a hurdle PBB must overcome.

Incentives are proving crucial to consumer adoption. For example, Uber offered a 40% discount on future rides to users who signed up for its PBB option, enabled by Stripe’s Link platform. Supermarkets, such as Tesco and Sainsbury’s, could leverage similar tactics, combining loyalty programs with PBB to attract users.

Fraud remains a significant barrier to adoption. Authorized push payment (APP) fraud is a growing issue in the UK, prompting regulatory changes. Since October 2024, UK payment service providers must compensate APP fraud victims up to £85,000 within five days. This regulation has driven investments in fraud prevention and compliance.

Pay by Bank, with its reliance on multifactor authentication through banking apps, aligns naturally with strong customer authentication (SCA) requirements. While this may create initial friction for users, it addresses security concerns, offering a safer alternative to card payments. As Philip Benton notes, banks could see reduced fraud losses, offsetting potential declines in card revenue.

The potential applications for PBB extend far beyond e-commerce. Variable recurring payments could replace direct debits, and small and medium enterprises (SMEs) could benefit from seamless transactions without manual intervention. For local shops, PBB might eliminate minimum spend charges, further enhancing convenience.

However, as Benton highlights, collaboration among stakeholders—governments, merchants, and payment issuers—is essential to drive adoption and position PBB as a mainstream payment option.

Pay by Bank is poised to transform the payment landscape, offering benefits for both merchants and consumers. With improved API infrastructure, targeted incentives, and robust fraud prevention measures, its adoption is a matter of ‘when,’ not ‘if.’