Hot on the heels of Amazon, eBay has announced the introduction of Pay by Bank as a payment method in the UK. If there was ever any doubt, this indicates that Pay by Bank is no longer an emerging concept, but is now firmly mainstream and rapidly becoming a global payment option.
What started as a “made in Europe” alternative to card payments is now a true disruptive force. Pay by Bank offers a compelling proposition: faster payments, greater security and a simpler user experience, all challenging the long-standing dominance of traditional payment methods. And adoption is accelerating rapidly. In a recent Token.io survey, 91% of respondents reported strong trading demand, while Open Banking Limited estimates a £4.4 billion opportunity.
For UK businesses, the potential is significant. Over the next five years, Pay by Bank could deliver substantial cost savings driven by lower transaction fees and better automation in reconciliation. This includes an estimated £331 million of online payments, £40 million of in-store transactions, £110 million of one-off invoice payments and £78 million of recurring billing.
New payment schemes by bank
Today, popular Pay by Bank use cases include credit card payments, checking account top-ups, and savings account funding. However, in the coming months, adoption will expand significantly across a variety of new sectors and use cases as new Pay by Bank schemes emerge.
Next big use cases for Pay by Bank in the UK, for example, include automated top-ups of e-money accounts and everyday consumer transactions such as mobile phone, landline and broadband bills, utilities such as gas, water and electricity, contributions to pension schemes, attractions and cultural institutions, charitable donations and train ticket purchases.
As Pay by Bank grows, a familiar pattern begins to emerge: fragmentation
Across the UK and Europe, multiple industry-led and regulatory Pay-by-Bank schemes have emerged or are in development: the UK Payments Initiative, GiroAPI and S-Payments, to name a few. Each brings their own functionality, geographic reach, dispute frameworks and business models. While this reflects a healthy level of innovation and competition (evidence that the market is responding to real demand for Pay by Bank), it is also creating a more complex ecosystem.
In the UK and Europe, open banking regulation created a foundation. What it didn’t create was a finished product for each use case. Industry-led schemes emerged precisely because merchants, billers and consumers requested and needed more from Pay by Bank, such as recurring payment mandates and dispute resolution frameworks.
Each new Pay by Bank scheme represents a market signal. A plan focused on automated, recurring payments functionality in the United Kingdom solves different problems than one created to offer analogous functionality for the German market. The fact that multiple Pay by Bank schemes exist reflects a payments ecosystem that is maturing beyond a one-size-fits-all model; This is not a design flaw, rather it is what healthy competition looks like. Multiple vendors are investing, differentiating and building because the underlying opportunity is big enough to support.
It is worth stopping to consider what the alternative would be like. Card payments reached global scale by concentrating infrastructure on two dominant networks. That consolidation eliminated fragmentation, but it also eliminated significant competition in infrastructure, pricing and innovation for decades. The merchants accepted the compensation because there was no other viable alternative.
More complex but better results
Pay by Bank is taking the opposite tack. Rather than consolidating into a single scheme, the market is producing multiple approaches, each optimized for different geographies, use cases and business realities. This is more complex, but it is also how open markets generate better results.
Fragmentation is the inevitable consequence of a rapidly growing market, but it creates operational challenges for payment providers seeking to deliver seamless bank payment experiences to merchants and consumers.
On the one hand, multiple competing Pay by Bank schemes can drive innovation and expand payment options for consumers and businesses. But managing multiple Pay Per Bank schemes introduces complexity, impacting the ability of merchants, fintechs and payment providers to scale efficiently.
It’s easy to see a future where payment providers supporting Pay by Bank in the UK and Europe will need to integrate with many schemes, each with their own technical specifications and APIs.
However, the key is not to resist fragmentation, but to abstract it. The organizations that will be successful are those that access multiple Pay Per Bank schemes through a unified layer, benefiting from the reach and functionality of different networks without directly managing them.
This requires an infrastructure partner that simplifies integration, harmonizes rules, standardizes payment flows where possible, and enables scalability across markets.
One of the most significant structural changes in modern payments
Pay by Bank is on track to become one of the most important structural changes in modern payments. The existence of multiple players competing to offer innovative Pay Per Bank functionality that delivers the best results should be seen as a positive sign that the market is maturing beyond its open banking origins into something even more robust.
If managed effectively, the next phase of market maturity has the potential to deliver truly innovative bank payments experiences that expand competition and drive better outcomes for businesses and consumers. Otherwise, fragmentation risks slowing down what would otherwise be one of the most promising innovations in the evolution of global payments.
Pay by Bank is fragmenting because the market is working. The task now is to future-proof a multi-schema world, with a partner whose infrastructure ensures fragmentation never becomes a barrier to scaling.
Todd Clyde, CEO of Token.io
“Pay by Bank is fragmenting – that’s a sign it’s working, but there’s a problem” was created and originally published by Retail Banker International, a brand owned by GlobalData.
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