A new option has been showing up at online checkouts next to the usual credit and debit buttons. It goes by different names depending on the merchant: pay by bank, bank transfer, pay directly from your account. Sometimes it comes with a small discount attached, or loyalty points, or a promise of faster refunds.
What it does is simple enough. Instead of sending your payment through Visa or Mastercard, the merchant pulls the money straight out of your checking account. The card networks are cut out of the middle entirely.
That single change alters who makes money on the transaction and, more importantly for you, who has to help if something goes wrong.
How the payment actually moves
In a card transaction, your purchase travels through a long chain. The merchant’s processor sends it to a card network, the network routes it to your bank, your bank approves or declines it, and money settles a day or two later. Every participant in that chain takes a cut, and every participant is bound by the network’s rules.
Pay by bank skips all of it. You authorize the merchant to debit your account, usually by signing into your bank through a connection provider inside the checkout window, and the money moves over the ACH network or, increasingly, over an instant rail like FedNow or RTP. These are the same pipes that carry your paycheck and your mortgage payment. They are also the reason the transaction is cheap.
Account-to-account payments of this kind are not new in the abstract. What is new is retailers pushing them at the point of sale. McKinsey has projected that account-to-account payments could handle roughly $200 billion in United States consumer-to-business transactions by 2026. In the United Kingdom, where the infrastructure matured earlier, the Bank of England announced in February 2026 that it would consult on expanding direct bank payments as a card alternative both online and in stores.
The Federal Reserve Bank of Kansas City has published research on whether American consumers are ready for this at the register, and the short version is that awareness is still the bottleneck. Most people have never been asked to pay this way.
Why merchants want you to choose it
Card acceptance is expensive. Between interchange, network assessments, and processor markup, a merchant typically gives up somewhere between 1.5 and 3.5 percent of a credit card sale. On an ACH transfer, the cost is measured in cents.
For a retailer running thin margins, that spread is enormous. A grocery chain doing a billion dollars in card volume is handing over tens of millions a year in acceptance costs. Payment providers pitching pay by bank routinely claim merchants can cut transaction costs dramatically compared with cards, and even a conservative reading of those claims leaves a lot of money on the table.
Which is why the discounts exist. When a merchant offers you two percent off for paying from your bank account, it is not generosity. It is a share of the interchange they no longer have to pay. Research by Opinium found that a majority of consumers said they would consider pay by bank if incentives like discounts or perks were attached, and merchants have clearly read the same numbers.
The other thing merchants get is certainty. There is no chargeback process in account-to-account payments, so a completed payment stays completed. That is a feature from the merchant’s side of the counter. From yours, it is the whole catch.
The protection you give up
This is the part worth slowing down on, because the difference in your rights is not small.
When you pay with a credit card and the merchant never ships, ships the wrong thing, or turns out not to exist, the Fair Credit Billing Act gives you the right to dispute the charge with your card issuer. The issuer pulls the money back from the merchant while it investigates, and you are not out the cash in the meantime. Card network rules layer additional protections on top of that legal floor.
Debit cards sit a step lower but still have real coverage. Regulation E, which implements the Electronic Fund Transfer Act, protects you against unauthorized transfers, with liability capped if you report promptly.
Pay by bank lives in that Regulation E world, not the credit card world. If someone gains access to your account and moves money without your permission, you have error resolution rights, and the CFPB explains those rights clearly. But if you authorized the payment yourself and the merchant simply failed to deliver, that is a dispute between you and the merchant. Your bank did not agree to sit in the middle of it, and there is no network rulebook forcing anyone to take your side.
Instant rails make this sharper. An ACH debit takes a day or two to settle, which at least creates a window. A FedNow or RTP payment settles in seconds and is effectively final, the same way a wire transfer is final.
Where it makes sense anyway
None of this makes pay by bank a bad option. It makes it a specific option with a specific profile.
It works well when you already trust the recipient and the amount is large enough for the savings to matter. Rent paid to a landlord you have a lease with. A utility bill. A tax payment. Funding a brokerage account or a savings transfer. Tuition. Recurring payments to a business you have dealt with for years. In these cases you were never going to file a chargeback anyway, and skipping a card processing fee or earning a small discount is straightforward upside.
It works badly for first-time purchases from unfamiliar sellers, anything shipping from far away, event tickets, custom orders, deposits on future work, and any purchase where delivery is uncertain. Those are precisely the situations where a credit card’s dispute rights are worth more than two percent.
There is also a budgeting dimension people underestimate. A card purchase is a promise to pay later; a bank payment is cash out of your checking account right now. That is good if you are trying to stop floating expenses on credit and bad if your balance runs close to zero near payday. A pay by bank transaction that arrives before your paycheck can trigger an overdraft in a way a credit card charge never would.
Deciding for yourself
A reasonable rule: use pay by bank for the bills you would have paid by check or automatic transfer anyway, and keep a credit card for anything a stranger has to ship to you.
If you do start paying this way, watch the checkout screen for what you are authorizing. Some merchants ask for a one-time payment and some ask for standing permission to debit your account in the future, and the language separating the two can be easy to skim past. You can revoke that authorization with your bank later, but it is a phone call and a form rather than a checkbox.
Also check where the money is coming from. Linking the payment to a secondary checking account, rather than the account that holds your entire paycheck, limits the damage if credentials ever get compromised. It is the same logic behind keeping savings at a separate institution: a little friction between a stranger and your balance is usually worth it.