A Quiet Surge in Adoption
How to pay securely online has been an ongoing concern since the advent of the commercial Internet in the late 1990s. Indeed, one of PayPal’s claims to fame (and success) was to allow users a single point where to keep the now familiar ritual: type in your card number, expiry date and CVV, hope the transaction goes through, and perhaps complete a two-factor authentication step. However, speaking recently on BBC Breakfast, fintech commentator Peter Ruddick noted that the UK has already seen growth of something rather different called Pay-by-Bank.
A Bit of Fintech History
In the UK, this new method roots to 2016 when The Competition and Markets Authority (CMA) mandated the creation of the Open Banking Implementation Entity (OBIE) following an investigation into retail banking competition. This was followed by The Retail Banking Market Investigation Order, which came into effect in 2017, legally requiring the UK’s then nine largest banks (the CMA9 – Barclays, Lloyds Banking Group, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide, and AIBG ) to share data with authorised third parties.Open Banking was introduced the following year, in 2018, as the underlying regulatory framework and technology that enables an account-to-account payment method, while Pay by Bank is a specific consumer-facing payment method powered by that technology. In other words, Open Banking provides the “pipes” (APIs) and rules, while Pay by Bank is the specific “tap” you turn on at a digital checkout to use those pipes.
Ruddick and supporters of Open Banking claim that Pay by Bank represents a big change in how money moves online. Rather than routing funds through card networks, acquirers, or intermediary wallets, it allows instant settlement straight from a consumer’s bank account to a merchant’s. No card details are entered, no CVV typed, no extra layers of friction added for security. Ruddick noted that in the UK, Pay by Bank has gained quite momentum with around 36 million Pay-by-Bank transactions in 2026 alone.
The UK Payments Landscape: Perspective Matters
Industry insiders would opine that new technologies like instant payments and Open Banking rails are slashing costs dramatically. As seen in Keyna’s MPesa, Brazil’s PIX or India’s UPI, where cash reliance has diminished not through mandates but through usable, low-friction alternatives.
Recent figures underscore this perception. See Table 1 below. Open banking payments reached around 351 million in 2025 in the UK, a substantial rise from prior years, with variable recurring payments (a key subset) now forming roughly 16% of the total. Early 2026 data shows a continued upward trajectory, albeit at a steadier pace—monthly volumes hovering near or above 30 million in recent periods, supported by major platforms like Amazon and eBay integrating the option. Awareness of the term “Pay by Bank” has paradoxically dipped among consumers, dropping to about 38% familiarity in recent surveys despite the volume surge, reflecting terminology confusion (“instant bank transfer,” “account-to-account,” and so on) rather than rejection.
Table 1: Distribution of Payment Methods in the UK, 2025
To place this data in context, consider the broader UK payments picture. Debit cards still dominate with roughly 26 billion transactions annually, capturing over half the market share. Faster Payments, the underlying infrastructure for many Pay by Bank flows, handles around 5-6 billion. Direct Debits underpin recurring needs at nearly 5 billion, while cash lingers at about 4-5 billion despite its decline. Open banking payments, even at their 2025 level of 351 million, represent only a small fraction—around 0.7% of the total non-cash volume—but their growth rate stands out as the fastest among established methods: 57% year-on-year growth, nearly one million new users per month and record monthly volumes exceeding 14 million transactions.
The Invisible Economics of Payments
The appeal of Pay by Bank lies in simplicity and economics: no card details to steal, near-instant settlement, lower merchant fees than card rails (often 1-2% versus higher interchange), and reduced fraud surface. Yet the deeper issue is not technical capability but economic visibility.
One of the longstanding truths in retail payments and one rarely discussed aspect of this industry: pricing transparency. Consumers tend to assume all payment methods cost roughly the same. In reality, they do not. Payments other than cash or direct transfer involve multiple actors: issuing banks, acquiring banks, card networks, payment gateways, and digital wallets. Each layer extracts a fee.
Account-to-account payments, by contrast, typically involve no intermediaries and lower ot no transaction costs. Yet consumers rarely see those savings reflected in checkout decisions. Consumers choose based on convenience, perceived liquidity, or the allure of deferred payment. Behavioural evidence consistently shows people favour options that push costs into the future, even if subtly embedded in higher retail prices.
This creates a tension. If a merchant can offer six interest-free instalments via BNPL, is that unambiguously good for the consumer? It depends on individual time preferences and discipline, but the decision is seldom fully informed—the true cost is diffused across the system rather than signalled clearly at the point of choice. Pay by Bank could, in theory, alter this dynamic. Fewer intermediaries mean lower fees for merchants, which could translate into explicit price differences or incentives to steer customers toward the cheaper rail. In practice, though, merchants hesitate to highlight such savings, and consumers show little appetite for switching purely on abstract efficiency grounds.
Forecast: Where Pay by Bank Could Go Next
Looking ahead, projections suggest steady if unspectacular scaling. From the 2025 base, volumes could approach 900 million by 2027 as e-commerce integrations deepen, perhaps reaching 2 billion by 2030 when merchant steering becomes more common, and potentially 5 billion by the mid-2030s—around 10% share—if open finance matures, APIs standardise further, and protections align closer to card-level safeguards. These estimates hinge on stronger incentives and regulatory parity; without them, the method risks remaining a niche convenience rather than a conscious preference.
Why is there no regulatory parity? Pay by Bank lacks the legal protections of credit cards because it is classified as a bank transfer or cash payment rather than a credit agreement, meaning it is not covered by Section 75 of the Consumer Credit Act 1974. Additionally, unlike debit and credit cards, which follow voluntary chargeback rules set by networks like Visa and Mastercard, Pay by Bank transactions are direct Faster Payments that do not currently have a built-in reversal or dispute mechanism.
Table 2. Pay by Bank Forecast 2025-2030
Card schemes triumphed not on lowest cost but on trust—chargebacks, fraud liability shifts, straightforward disputes and, of course, “no discrimination” clauses. Pay by Bank excels at efficiency but must still prove equivalent consumer protections to gain similar confidence. Meanwhile, global examples remind us that innovation thrives when it delivers usability and immediacy, not merely lower abstract fees.
Ultimately, Pay by Bank’s promise extends beyond reducing friction. It offers a chance to make the economics of payment visible again—to let price signals guide choices amongst payment media rather than opaque intermediation. Until merchants and regulators foster that transparency, the option will likely keep growing quietly: useful for those who discover it, but for most, just another button among many, convenient yet unexamined. The quiet revolution may yet reshape the infrastructure of exchange, but only if it succeeds in illuminating the costs hidden within it.
The Cashless Society 