Last checked 19 October 2026
Quick answer
Pay by bank is a way for customers to pay you directly from their bank account using open banking, instead of a card. The customer picks their bank, approves the payment in their banking app or online banking, and the money is sent to you. The company that starts the payment must be authorised or registered with the Financial Conduct Authority (FCA). Open Banking Limited says open banking is free to use, but firms that provide apps and services may charge for them, so check your payment provider’s fees and terms first.
This is general information, not legal or tax advice. Check GOV.UK or speak to a qualified adviser about your situation. Why we say this.
You may have seen “Pay by bank” as an option when paying a bill online, or on HMRC’s own payment pages. Some payment providers offer it to small businesses too, alongside card readers and payment links.
This guide explains what pay by bank is, how it works for you and your customers, and what to check before you offer it. We don’t rank providers. Fees and features change, so check each provider’s current terms.
What pay by bank is
Pay by bank uses open banking. The FCA’s guidance on account information and payment initiation services says a payment initiation service provider lets you pay companies directly from your bank account, rather than using a debit or credit card.
Open Banking Limited, the organisation behind the UK’s open banking website, says on its Why open banking is safe page that open banking payments are sometimes called “Pay by Bank”, “Pay by link”, “Bank Pay”, “Pay with Bank Transfer” or “Instant bank transfer”. Its FAQs say HMRC offers open banking as a way to pay Self Assessment, Corporation Tax, VAT and other taxes.
How a payment works for your customer
The steps vary by provider, but the pattern is usually:
- You send a payment link or QR code, or the customer chooses pay by bank at your online checkout.
- The customer picks their bank.
- They’re taken to their banking app or online banking to confirm.
- They approve the payment, and the money is sent to your account.
Open Banking Limited says customers are never asked to share their bank login details with anyone other than their own bank. It says banks and payment providers must apply Strong Customer Authentication under the Payment Services Regulations 2017, which means checking the person’s identity using at least two things from: something they know, such as a password or PIN; something they have, such as a phone or card reader; and something unique to them, such as a fingerprint or face scan.
Open Banking Limited also says customers need online or mobile banking for their payment account to use open banking.
What it means for you
Some points to weigh up:
- No card details. The customer pays from their bank account, so there are no card numbers to handle.
- Fees. Open Banking Limited says open banking is free for consumers, but firms that provide apps and services may charge for them. For a business, that means the payment provider’s fees. Compare them with what you pay for card payments.
- Payment references. Check whether the provider lets you set a reference, such as your invoice number. It makes matching payments much easier.
- Disputes and refunds. GOV.UK’s guidance on chargebacks is about card payments. Ask your provider how disputes and refunds work for pay by bank payments before you start.
Check the provider is regulated
The FCA says a firm offering payment initiation must be authorised or registered and have permission for the right activities. If it doesn’t, it says customers won’t have access to the Financial Services Compensation Scheme or the Financial Ombudsman Service if they want to complain.
Before you sign up, check the provider on the FCA register. Open Banking Limited also keeps a list of regulated providers on its website.
If a customer sees a payment they didn’t authorise
The FCA says that if someone sees a payment from their account that they didn’t authorise, they should contact their bank as soon as possible and claim a refund, even if they think a payment initiation service was used. Open Banking Limited says a regulated third party provider can’t make a payment from someone’s account without their consent.
Recurring payments
Open Banking Limited describes Variable Recurring Payments (VRPs) as a newer type of open banking payment. It says the customer agrees limits such as the maximum amount, frequency and length of the service, and stays in control with the ability to cancel. Whether you can offer VRPs depends on your provider.
Can I charge extra for pay by bank?
Be careful. Trading standards guidance from Business Companion says businesses can’t add surcharges for consumer debit or credit cards, or for electronic payment services such as PayPal. Where a surcharge is allowed for other methods, it says the charge to consumers mustn’t be more than the cost of processing that method and mustn’t be hidden. If you’re thinking of adding any fee for how a customer pays, check that guidance first or speak to a qualified adviser. Our guide to taking card payments covers the surcharge rules for cards.
Recording pay by bank income
Pay by bank income is business income like any other. GOV.UK’s Business records if you’re self-employed guide says you must keep records of all sales and income. If you use a bank feed, payments should show up in your bookkeeping software: our guide to bank feeds explains how they work and what to check.
Staying alert to scams
Because pay by bank sends money straight from an account, make sure customers know the genuine way to pay you. Put your payment details or link on your invoice, and tell customers you won’t change them by text or email without warning. Our guide to spotting fake HMRC messages has tips on checking messages that apply more widely.
Frequently asked questions
Is pay by bank the same as a bank transfer?
The money moves between bank accounts, but with pay by bank the customer starts the payment through a regulated provider and approves it in their banking app.
Do customers need a particular bank?
Open Banking Limited says the UK’s nine largest banks and building societies are required to make data available through open banking, and other banks can choose to take part.
Can I add a pay by bank link to my invoices?
Some invoicing and payment tools offer this, so check with your provider. Our guide to writing an invoice covers what the invoice itself must include.
Is it suitable for deposits?
It can be a quick way to collect a deposit. Our guide to deposits and stage payments explains how to set out each payment.
Sources
All checked on 19 October 2026.
- Account information and payment initiation services (Financial Conduct Authority)
- Why open banking is safe (Open Banking Limited)
- Open banking FAQs (Open Banking Limited)
- Invoicing and taking payment from customers (GOV.UK)
- Payment surcharges (Business Companion, trading standards guidance)
- Business records if you’re self-employed (GOV.UK)
Where to check
What changed. : . 30 October 2026: First published.
