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 2026 is looking like a real turning point, especially now that Walmart is rolling out an enhanced Pay by Bank option through a partnership with Fiserv.

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 gaining a stronger regulatory footing in the US too, thanks to the CFPB's Section 1033 rule under the Dodd-Frank Act, finalized in late 2024, which requires the largest financial institutions to open up secure data access by April 2026. It's worth being honest that the US is earlier in this journey than markets like the UK and Europe; American consumers have historically been more attached to cards and checks, and one 2023 study found 39% of US consumers said they were unlikely to use Pay by Bank even with incentives. But the infrastructure and regulation are catching up fast, and Walmart's move is exactly the kind of moment that tends to shift things, big retailers adopting something new tends to be what finally gets consumers to try it. For merchants, that's the practical takeaway: the businesses that offered contactless early didn't gain much of an edge, but the ones who left it too late ended up looking dated to customers who'd already gotten used to it elsewhere.

Now, let's take a look at some of the numbers more closely. Real-time payments, the infrastructure Pay by Bank relies on, accounted for just 1.8% of US electronic payments volume in 2023, compared to 19.1% globally, so there's real room to grow here. But that gap is exactly why Walmart's move matters: as more banks connect to instant payment rails like RTP and FedNow, adoption is expected to accelerate quickly, not something to dismiss as a UK-only trend.

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
4. The payment lands in your account within seconds, sent via an instant payment network like RTP or FedNow

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, which combined hold roughly 84% of the US credit card market, recently agreed to lower swipe fees as part of a class-action settlement, though even that reduction is expected to save merchants and consumers only around $30 billion over five years, small potatoes against what merchants pay overall. 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 runs on instant payment rails like RTP and FedNow, funds can land in your account almost immediately once the customer approves the payment, rather than the multi-day wait typical of card settlement or even standard ACH transfers. 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. Our guide on cash flow management for seasonal businesses covers this in more depth if timing gaps are a recurring issue for you.
• 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 may take a little longer to come around, but the momentum is building: Unlike the UK, where big retailers already normalised the option, American shoppers are still getting used to the idea, that 39% "unlikely to use it" figure from 2023 is a real signal worth taking seriously. But with Walmart, one of the most influential retailers in the country, pushing Pay by Bank hard, and CFPB regulation forcing banks to open up access, that hesitancy is likely to fade faster than it took the UK to get comfortable with contactless.

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:

Customer familiarity is still building: Plenty of your customers still default to a card out of pure habit; it's what they've always done, and old habits take time to shift even when the alternative is objectively better for both of you. Pay by Bank tends to work best as an additional option sitting alongside your existing payment methods, rather than a replacement from day one.

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 US merchants taking online or app-based payments, the answer is increasingly 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 Walmart now pushing Pay by Bank at scale, there's a real chance American consumer comfort catches up quickly. A smart approach may be to get comfortable offering it early rather than scrambling to catch up later, the same way contactless went from a nice-to-have to an absolute baseline in just a few years.

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.

If you're weighing up your own payment setup, whether that's card machines, a way to take remote payments via a link, or your overall payment processing more broadly, it's worth thinking about where Pay by Bank might fit into that picture too.