open banking payments
What It Is, How It Works, and Why It Matters

open banking payments (also called Pay by Bank or account to account payments) is a secure way to pay online directly from your bank account. Instead of entering card details, you approve the payment through your bank’s mobile app or online banking. The money moves instantly from your bank to the merchant using the UK’s Faster Payments network.

Pay by Bank is powered by open banking, a UK regulatory framework that allows regulated fintechs to initiate payments on behalf of consumers with their consent. Adoption has grown quickly, and in 2026 Amazon added Pay by Bank as a checkout option in the UK.

How Pay by Bank Works

A Pay by Bank payment is a digitally initiated bank transfer embedded into checkout. The steps are initiated bank transfer embedded into checkout.

The steps are:

  1. Choose Pay by Bank at checkout.
  2. Select your bank from the list of participating UK banks.
  3. Approve the payment in your banking app using Face ID, fingerprint, or a secure passcode.
  4. Your bank sends the payment instantly via Faster Payments, and you return to the merchant site with confirmation.

Behind the scenes, a regulated Payment Initiation Service Provider (PISP) connects the retailer to your bank using secure open banking APIs.

Why Pay by Bank Is Secure

  • Authentication happens directly in your banking app.
  • No card numbers are shared or stored.
  • Payments are prefilled by regulated providers to avoid errors.
  • On Amazon, Pay by Bank is covered by the A to Z Guarantee filled by regulated providers to avoid errors.

Note: Pay by Bank on Amazon is covered by Amazon’s own guarantee, but protections differ from card payments. As this is the first major retail deployment of Pay by Bank, the consumer protection framework is still evolving; customers should consult Amazon’s support pages for up-to-date guidance.

Timeline: How Pay by Bank Developed in the UK

2016 – CMA Mandate: The Competition and Markets Authority order the UK’s nine largest banks to open up secure data and payment access, creating the foundation for Open Banking.
2018 – Open Banking Launch: Banks release APIs enabling account access and payment initiation (aligned with PSD2).
2021 – First Government Adoption: HMRC introduces “Pay by bank account” for taxes.
2022 – Variable Recurring Payments (VRP): Banks are mandated to support VRP for sweeping, enabling automated bank to bank transfers.
2022 – Usage Surges: 68 million Open Banking payments are made (up from 25 million in 2021).
2023 – 6 Million Active Users: Open Banking Limited announces the core roadmap as substantially complete.
2025 – Mass Adoption: More than 15 million UK users; nearly 33 million Pay by Bank transactions processed in November 2025 alone, while fraud remains exceptionally low. Open Banking fraud rates stood at just 0.013% of transactions between March 2024 and September 2025, compared to the 0.045% industry average‑to‑bank transfers.
2026 – Amazon Adds Pay by Bank: Amazon UK introduces Pay by Bank at checkout in partnership with TrueLayer.

Who Makes Pay by Bank Possible

  • Banks: Provide secure access, authenticate users, and process payments.
  • Fintech PISPs: Provide the connection between merchants and banks
  • Merchants: Offer Pay by Bank as an alternative to cards.
  • Regulators and Industry Bodies: CMA, FCA,PSR, Bank of England, Pay.UK, and Open Banking Limited maintain safety, rules, and infrastructure.

Benefits of Pay by Bank

For shoppers:

  • Fast checkout without card data
  • Biometric grade security
  • Instant payments and rapid refunds
  • Clear visibility of your bank balance before paying grade security.‑grade security

For merchants:

  • Lower payment processing costs
  • Reduced fraud and chargebacks
  • Higher conversion through simpler checkout
  • No card expiries or failures

For the wider economy:

  • Greater innovation from fintech providers
  • More competition in payments
  • Lower costs for merchants

The Future of Pay by Bank

Regulators are shaping the next phase:

  • Expansion of Variable Recurring Payments beyond sweeping
  • Upgrades to Faster Payments infrastructure
  • Development of open finance to expand data access across financial services
  • Wider merchant adoption as large retailers validate the model.

As the ecosystem grows, Pay by Bank is gaining traction as a standard payment method alongside cards and digital wallets.