Which? warns shoppers to think carefully before using Pay by Bank due to weak consumer protections

Which? is warning consumers to be alert to the risks of using Pay by Bank to make retail purchases, as it lacks Section 75 and chargeback protections.

In recent years, consumers have been presented with an ever growing list of payment methods when buying goods and services. Rather than simply picking between cash or card, the options now include everything from digital wallets like Apple Pay to short term credit agreements in the form of Buy Now Pay Later.

Pay by Bank is the latest to join the list, allowing people to quickly and securely pay money directly from their bank account without needing to enter the recipient's bank details or use a card.

Many consumers will likely be familiar with using Pay by Bank to settle credit card balances and tax returns - it's a popular method for paying bills and HMRC alone has collected more than £33 billion via Pay by Bank since it started using it in 2021. 

Only more recently has Pay by Bank become an option for retail purchases, and its use is growing rapidly - it's seen 70 percent growth year-on-year, with 31 million transactions in March this year alone.

It's a potential gamechanger for businesses as they can avoid card transaction fees and also benefit from receiving customer funds immediately.

There's appeal for consumers too - refunds can be processed instantly, and most crucially, card details aren't shared when making a transaction - eliminating the risk of them being stolen or compromised. 

Yet despite its many benefits, Which? is concerned that purchase protections are lagging behind, leaving consumers who use Pay by Bank unwittingly exposed in certain circumstances. 

While all purchases are covered under the Consumer Rights Act (meaning any goods you buy must be fit for purpose, as described and of satisfactory quality), these protections are not always easy to enforce.

In the event an item arrived damaged or not as expected a retailer should refund you under the Consumer Rights Act - but if they refuse your only recourse would be filing a claim in the small claims court, which can be an expensive and time consuming process.

Consumers may also face difficulties in the event of a business going bust, particularly if there's an issue with a future-dated purchase - for example if an airline goes out of business before you fly, or a festival goes bankrupt and the event is cancelled. Items with long lead times - say substantial household purchases like a new sofa or kitchen - could also be at risk. 

In contrast, a shopper using a credit card for these purchases would benefit from Section 75 protection, so long as the transaction was for more than £100 and less than £30,000. Under Section 75, a credit card company is jointly and severally liable for the purchase, meaning they would have to refund you if you couldn't recoup your costs from the retailer.

Likewise, those using a debit card or a credit card for purchases of any value would have protections via the voluntary chargeback scheme. 

Worryingly, consumers may be unaware of this protection gap, even as it becomes an increasingly prominent option at online checkouts. When Which? carried out a nationally representative survey of over 2,500 adults in March this year, only one in eight people (13%) were aware they would have no clear purchase protections if they used Pay by Bank to book flights and the airline subsequently stopped trading. 

Respondents told Which? ‘it's a minefield' or ‘too confusing' to understand payment protections, making some feel wary about paying the ‘wrong' way.

Ryanair, for example, now lists Pay by Bank as its default payment method on its website, while other airlines including Wizz Air, Emirates, Etihad and Norwegian also offer it. Major booking sites like Booking.com and Lastminute.com utilise Pay by Bank, as do major retailers including ToppsTiles, JustEat and Urban Outfitters.

Which? is calling on the regulator to ensure there are suitable purchase protections - and ultimately give consumers the confidence to embrace a payment method which otherwise carries many benefits.

Until protections catch up, consumers should consider carefully if it's the right payment method for their circumstances. 

Jenny Ross, Which? Money Editor, said:

“Innovations like Pay by Bank present opportunities for businesses and consumers alike, but they're not without risk, particularly as they lack the rigorous purchase protections you get when paying by card.

“We're calling on the regulator to act to ensure consumers can use Pay by Bank with confidence, but in the meantime, we'd urge consumers to think carefully before using it to book events or make substantial purchases - for now, your good old-fashioned credit or debit card may be the best option.” 

-ENDS-

Notes to editors:

• Which? surveyed 2,514 adults in the UK in March 2025. Fieldwork was carried out online by Deltapoll and the data has been weighted to be representative of the UK population (aged 18+)

• Under Section 75 of the Consumer Credit Act 1974, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader, for purchases over £100 and up to £30,000. This means it is just as responsible as the retailer or trader for the goods or service supplied, allowing you to also put your claim to the credit card company.

• You don't have to reach a stalemate with the retailer or trader before you can contact your credit card provider - you can make a claim to both the retailer and credit card provider simultaneously, although you can't recover your losses from both.

• Chargeback applies to both credit and debit card purchases of any value, through voluntary industry schemes run by Amex, Mastercard and Visa.

• You can find Which?'s step by step guide to making a claim via Section 75 and chargeback here.

How to use open banking safely

• Stay alert to scams, such as fake websites claiming to offer Pay by Bank to steal your login credentials or rogue apps posing as open banking services. You should always be directed to your bank's official app or website. Contact your bank if something goes wrong with a purchase or you're the victim of fraud.

• Check the third-party firm is authorised to offer open banking services by searching the Open Banking Directory which provides a list of regulated firms and apps authorised at openbanking.org.uk.

• The Financial Services Register will also tell you if a firm is authorised by the Financial Conduct Authority (FCA) to carry out account information sharing services, payment initiation services, or both. See register.fca.org.uk.

• Revoke consent if you want to stop sharing your data or cancel a recurring payment with a regulated third party. You can do this via your bank account – look for ‘open banking' or ‘connections' in your bank's app or website.

• If a fraudster does find a way to use Pay by Bank to make unauthorised payment from your account, you can get redress under the Payment Services Regulations. You can also claim reimbursement if you're tricked into authorising a payment to a scammer, under the authorised push payment (APP) fraud reimbursement scheme.

• Find more advice from Which? on open banking here.