Pay by bank

Pay by bank, also called bank transfer payment or account-to-account (A2A) payment, is a payment method that moves funds directly from a customer's bank account to a merchant's bank account without routing the transaction through a card network. Instead of entering card details, the customer authenticates directly with their own bank, typically through the bank's own app or login, and authorizes the transfer.

The specific rails behind pay by bank vary by region. In markets with open banking regulation, such as the UK and the broader European Union under PSD2, a customer authorizes a payment initiation service provider to initiate a transfer directly from their account via API, authenticated through their bank's own security flow. In the United States, ACH (Automated Clearing House) handles direct debit and direct credit transfers between bank accounts, usually settling in one to a few business days, though same-day ACH offers a faster option. In the eurozone, SEPA direct debit performs a similar role for euro-denominated transfers. A subscription platform such as Recurly connects to the payment rails a merchant needs to bill recurring charges, using ACH in the US, and SEPA in the UK and EU.

Why pay by bank matters for subscription businesses

Pay by bank is gaining attention in subscription billing because it offers a different cost and risk profile than card payments. Because it bypasses card network interchange and scheme fees, it is commonly cited as a lower processing cost option for merchants, though the exact savings depend on the card mix and rail being compared and should be verified against actual processing data rather than assumed. It can also reduce certain kinds of fraud exposure, since the customer authenticates directly with their own bank rather than entering card credentials that can be stolen or reused elsewhere. In some regions, direct bank transfer is also simply the payment method customers already trust and use daily. SEPA direct debit, for example, is a widely used way to pay for subscriptions across parts of Europe, and ACH is commonly used for larger recurring B2B payments in the United States, which makes pay by bank support relevant for any subscription business selling into those markets.

How pay by bank works

While the underlying rail differs by region, the customer-facing flow is broadly consistent:

1. The customer selects pay by bank, or an equivalent option, at checkout.

2. The customer is directed to authenticate with their bank, through a login, biometric check, or one-time passcode, depending on the specific rail.

3. The customer authorizes the exact payment amount and the merchant receiving it.

4. Funds move from the customer's bank account to the merchant's account. Timing depends on the rail. Some open banking transfers settle near instantly, while ACH and SEPA direct debit can take one to a few business days.

5. The merchant receives confirmation, which in many cases arrives near instantly even when final settlement of funds takes longer.

Pay by bank vs card payments

Pay by bank and card payments differ in cost, speed, and dispute handling. Card payments route through a card network and typically settle authorization near instantly, but they carry interchange and scheme fees that add to the merchant's processing cost, and they carry a chargeback mechanism that lets customers dispute charges directly with their card issuer. Pay by bank bypasses the card network entirely, which is why it is often cited as a lower cost option, and many bank transfer rails do not have a chargeback mechanism equivalent to card networks, though dispute processes still exist and vary significantly by rail and region. The tradeoff runs the other direction on familiarity and friction: card payment is more universally familiar to consumers, while pay by bank authentication flows can add friction depending on how smooth a given bank's own app or login experience is, and settlement can be slower than card authorization on some rails.

Benefits and examples

For subscription businesses evaluating pay by bank as a payment method, the appeal centers on cost, fraud reduction, and regional payment habits.

• Lower processing costs in many cases, since the transaction bypasses card network interchange and scheme fees.

• Reduced exposure to certain types of card fraud, since the customer authenticates directly with their own bank rather than sharing card credentials.

• Fewer chargebacks on rails that lack a card-style dispute mechanism, though this varies by rail and region and should not be treated as a guarantee.

• Better conversion in regions where bank transfer or direct debit is already a preferred way to pay, such as SEPA direct debit in the UK and EU.

Illustrative example: imagine a European subscription business processes 1,000 monthly renewals at $30 each, entirely by card, and pays an average combined interchange and scheme fee of 2 percent per transaction, or $0.60 per renewal, totaling $600 in fees across the batch. If the same business shifts 400 of those renewals to SEPA direct debit at a flat fee of $0.10 per transaction, the SEPA batch costs 400 x $0.10 = $40, compared to the $240 those 400 transactions would have cost as card payments (400 x $0.60), an illustrative savings of $200 on that portion of the batch.

Frequently asked questions

What does pay by bank mean? Pay by bank means paying for something by transferring funds directly from a customer's bank account to a merchant's bank account, rather than using a card network.

Is pay by bank the same as ACH? ACH is one specific rail used for pay by bank in the United States. Other regions use different rails, such as SEPA direct debit in the eurozone or open banking payment initiation in the UK and EU, so pay by bank is the general category and ACH is one implementation of it.

Is pay by bank cheaper than card payments for merchants? It is commonly cheaper because it bypasses card network interchange and scheme fees, though the actual savings depend on the specific rail, region, and the merchant's existing card processing costs.

Does pay by bank settle instantly? It depends on the rail. Some open banking transfers settle near instantly, while ACH and SEPA direct debit typically take one to a few business days, with same-day options available on some rails.

Does Recurly support pay by bank? Recurly connects to bank-based payment rails for recurring billing, though the specific pay by bank methods and the regions they are available in should be confirmed against current Recurly documentation.