Pay by Bank Explained: What It Means for Merchants

You've probably noticed 'Pay by Bank' popping up at checkout more often lately, but you might not be completely certain of what it actually is, or why you're suddenly expected to offer it. Pay by Bank isn't a brand new concept; in fact, it's been quietly building momentum for years, and it's now landing in Canada too. Flywire and Trustly expanded their partnership in August 2026 to offer Pay by Bank in Canada, a notable first step even before the country's own regulated open banking payment rails are fully up and running.

As a merchant, if you plan on offering a new payment method, it's really worth understanding it properly. That's why in this blog we answer all your questions, from what it is to what it could genuinely mean for your margins, your cash flow, and your customers. So what do you say, shall we dive right in?

What is Pay by Bank, in plain terms?

Pay by Bank, also known as open banking payments or account-to-account (A2A) payments, lets customers pay you directly from their bank account instead of typing in card details. So instead of a 16-digit number, an expiry date, and a CVV, the customer simply approves the payment through their banking app using Face ID, a fingerprint, or a secure passcode, and the money moves straight from their account to yours. Right now, this is only available for online and app-based checkouts; there's no widespread in-person version yet, so it's most relevant if you take orders through a website, app, or invoice rather than purely over the counter.

It's worth being upfront that Canada is genuinely early in this journey. The country's own framework, now called Consumer-Driven Banking, is still being developed under the Bank of Canada's oversight, and as of August 2026, the government is still working on the implementation rules for a fully regulated open banking payment system. That's exactly why the Flywire and Trustly launch is interesting: rather than waiting for those future rails, they're modernising an existing, familiar Canadian payment method, Interac e-Transfer, adding better authentication and a smoother checkout experience on top of it, for payments up to C$3,000. So while the term "Pay by Bank" is new to a lot of Canadian merchants, the underlying idea of paying directly from your bank account isn't unfamiliar here at all, thanks to how established Interac already is.

Now, let's take a look at some of the numbers more closely. According to Citi's Treasury and Trade Solutions research, open banking transactions in North America are projected to rise from 5% of e-commerce sales in 2023 to 7% by 2027, a modest but genuine shift, and one that's likely to accelerate as Canada's own regulated system matures alongside early movers like Flywire and Trustly.

How it actually works at your checkout

We get it, adjusting checkout to include a new payment system can feel a bit daunting. The last thing you want is anything that adds friction, and it's fair to wonder whether a new system might do exactly that before it's had time to prove itself.

Fortunately, the process itself is refreshingly simple from the customer's side, and it should slot into your current checkout without much trouble. Here's what it actually looks like:

1. They choose Pay by Bank at your checkout
2. They select their own bank from a list of participating banks
3. They approve the payment inside their banking app, or authorise it via Interac e-Transfer
4. The payment lands in your account, often within minutes rather than the days a card payment can take to settle

Behind the scenes, a regulated payment provider handles the connection between your business and the customer's bank, using secure banking APIs. The benefit is that no card numbers ever get shared or stored on your systems, which is a huge security win, as it tends to reduce your compliance burden.

Why Pay by Bank matters specifically for your margins and cash flow

So why does any of this actually matter for your business? Let's focus on the practical cases for adopting it.

• Lower costs on every transaction: This is the kind of news you actually want to hear! Card payments come with layers of fees stacked on top of each other: interchange fees, scheme fees, acquirer fees. Each one nibbles away at your margin, and it adds up more than most business owners realise once they look at it across a full year. Visa and Mastercard fees in Canada have historically sat around 1.4% to 1.5% for standard transactions, and that's before additional network and processing costs are factored in. Pay by Bank cuts out a lot of that middle layer entirely, since the money moves bank to bank rather than through a card network with several parties all taking a cut along the way. This means that within a short amount of time, you could end up making significant savings simply by giving customers the option to pay this way, without changing anything else about how you run your business.
• Faster access to your own money: It gets even better! Because Pay by Bank in Canada currently runs through rails like Interac e-Transfer, funds can often land in your account within minutes of the customer approving the payment, a real improvement over the multi-day wait typical of standard card settlement. If cash flow timing is ever a headache for your business, then this could make a real, practical difference, not just a nice-to-have.
• Fewer chargebacks to deal with: Because the customer authenticates directly with their own bank rather than handing over card details you then have to process and secure, the fraud and dispute risk drops considerably (hooray!). This is a very palpable difference, as chargebacks and fraud losses can chip away at your profits, without you even noticing it.
• Your customers already trust the underlying idea, even if "Pay by Bank" itself is new: Interac e-Transfer is already a hugely familiar, trusted way for Canadians to move money directly between bank accounts. That existing comfort means the leap to using something similar at checkout is smaller here than in markets starting from scratch, even while the formal Consumer-Driven Banking framework is still being finalised.

What does it actually cost to set up?

At the end of the day, this is something you're really going to want to know! With Pay by Bank, there's no card machine to buy and typically no fixed setup fee; you sign up through a regulated payment provider who plugs into your existing checkout, and most charge on a per-transaction basis rather than a flat rate. Where card payments often cost 2-3% per transaction, Pay by Bank fees are usually much lower, sometimes under 1%, with no chargeback fees on top since the dispute mechanism simply doesn't apply the same way.

For a business processing a good chunk of transactions, the cost difference between the two is definitely worth weighing up seriously.

What you should weigh up before adding it

None of this means Pay by Bank should simply replace your existing card payments, at least not yet. Nor does it necessarily mean you should start offering it immediately. But as a merchant, it's important you remain educated on emerging payment methods, so that when you do decide to switch things up, you'll feel ready.

Here are a few things worth thinking through properly before you decide how much weight to put behind it:

The regulated framework is still being built: Unlike the UK, Canada doesn't yet have a fully operational, government-regulated open banking payment system, what's available today comes from private providers building on top of existing rails like Interac. That's not a reason to ignore it, but it's worth knowing the landscape is still actively evolving.

Refunds work a little differently: With no card involved, refunds go straight back to the customer's bank account, the same way the payment came in. It's usually simple, but worth checking exactly how your provider handles it if returns are a regular part of your business.

It needs a banking app to work smoothly: While Pay by Bank will work great for many, it will alienate customers without access to mobile banking, or those without their phone to hand. With this in mind, you might want to treat it as one strong option among several rather than your only one.

It currently suits online and app-based sales more naturally than in-person: At the moment, Pay by Bank is mostly confined to online transactions. In-person Pay by Bank experiences do exist and are developing, but if most of your trade happens face to face over a counter, card and contactless will likely remain your primary methods for a while yet, so no need to worry about changing anything.

Should you actually add it to your business?

Right, so let's try to get to the bottom of the question. For most Canadian merchants taking online or app-based payments, the answer is cautiously yes, especially when offered alongside your existing card options rather than instead of them. The cost savings, faster settlement, and lower fraud exposure add up to a genuinely compelling case, and with providers like Flywire and Trustly already bringing Pay by Bank to Canada ahead of the full regulated system, there's a real opportunity to get comfortable with it early. A smart approach may be to keep an eye on how the space develops while trialling it where it makes sense.

But ultimately, this is a decision that must be made by individual businesses, based on their own sales channels and appetite for change, because there's no single right answer that fits every merchant equally.