First it was eBay, then it was Amazon, and other marketplaces will follow to roll out Pay By Bank on their platforms. It’s the new way to pay and has huge advantages, not least of which is that you’ll never be trying to complete a purchase just to discover that your debit or credit card has expired and you have to go hunting for you new one.
The National Payments Vision set out the government’s ambitions for modern payments, and part of this is to unlock Open Banking which enables payments and refunds within seconds instead of days. Even if you use a debit or credit card and the payment looks instant, you’ll often see a ‘Pending Transaction’ in your bank statement, which means the transaction is there but the funds have yet to clear. Pay By Bank will make this instant.
Advantages of Pay By Bank
It’s worth noting that Pay By Bank is different to performing a manual Bank Transfer. With the later you log into your bank account and tap in the recipients bank account and sort code, with Pay By Bank their website payment flow prompts you to log into your bank account and automatically transfers the payment information.
The advantages of Pay By Bank are clear:
- No more expired cards
- Instant payments and refunds
- No need to enter card details – just log into your bank account
- Instant payments and refunds
Disadvantages of Pay By Bank
There is one big advantage of paying by card, and that’s consumer protection:
- No Section 75 protection – If a retailer fails to deliver or goes bust you’re on your own
If you’re buying something for more than £100, even if you only pay the deposit by credit card than you have a ton of protection. For purchases under £100, if you pay by Debit Card you can benefit from Chargeback for the next 120 days. With Pay By Bank the money is gone.
Consumer Protection
The National Payments Vision recognises the lack of protection and says that in time this will be addressed:
Adequate consumer protection must be delivered for Open Banking payments, and the government intends to address this through the future framework. Ahead of that framework being delivered, the government welcomes work – led by Open Banking Limited and overseen by the FCA and PSR – to stand up a dispute resolution process.
– National Payments Vision
In the mean time, at least for Pay By Bank on eBay and Amazon, I’m not minded to care too much as both of these platforms have great protections for buyers and in all but very rare circumstances put things right without the need to resort to card protections. But for high ticket items you may still want to pay by card just for the peace of mind, especially for transactions where there isn’t a large marketplace standing behind the transaction.
