Pay by bank moves from niche to necessity

By Vriti Gothi

Pay by Bank has rapidly moved from a niche payment option to an essential capability for financial institutions, as merchant demand and market confidence continue to drive widespread adoption. A new report from Token.io, in collaboration with Open Banking Expo, reveals that 59% of banks and 90% of payment service providers (PSPs) now offer, or plan to offer, Pay by Bank services, marking a turning point for open banking-enabled account-to-account (A2A) payments in the UK and Europe.

The report, titled Pay by Bank: Signals and Trends, surveyed 96 participants, including banks, PSPs, third-party providers (TPPs), merchants and industry observers. The findings indicate that strong merchant appetite is powering this momentum, with 91% of merchants expressing demand for Pay by Bank and 39% describing that demand as “high.” Lower processing fees, faster settlement times and higher conversion rates are among the key drivers encouraging merchants to embrace the payment method. In response, 95% of PSPs view Pay by Bank as a crucial part of their near-term product roadmap, with 40% labelling it “extremely important.”

Banks, too, are recognising the commercial opportunity, with 42% already providing Pay by Bank services to corporate clients and a majority planning to extend the offering to retail customers. Overall confidence in growth remains robust, as 78% of respondents anticipate at least moderate Pay by Bank expansion in the UK and 88% expect the same across Europe over the next year.

Todd Clyde, CEO at Token.io, said, “The research confirms significant appetite among all key payment stakeholders for A2A payments. Merchant demand is strong, PSPs are mobilising quickly, and banks increasingly view Pay by Bank as both a revenue driver and a core part of their product strategy,” he said. “The convergence of merchant appetite, PSP agility, and bank engagement signals a turning point for the market and suggests an industry readying itself for a future where Pay by Bank is a trusted and essential part of how merchants and consumers transact in the UK and Europe.”

Ellie Duncan, Head of Content at Open Banking Expo, said the findings reflect a market entering a new phase of growth and confidence. “Pay by Bank is clearly making inroads; 90% of respondents have used it personally, and its recognition as a secure, straightforward way to pay is driving adoption,” she said. “Combined with the industry’s growing awareness of commercial variable recurring payments (CVRP), the momentum feels unstoppable.”

The report also highlights increasing industry focus on CVRP, a Pay by Bank capability that supports recurring and one-click eCommerce payments. Nearly all TPPs and most PSPs report merchant interest in CVRP, and 62% of PSPs plan to introduce the feature by the end of 2026.

Another notable trend identified in the report is the growing emphasis on “onshoring” payment services. Three-quarters of respondents said reducing reliance on overseas card schemes and payment providers is at least “somewhat important” to their organisation, while 29% described it as “extremely important.” This shift aligns with the wider European ambition to build more resilient, regionally anchored payment infrastructure.

The findings suggest that Pay by Bank has reached an inflection point. Once considered a promising alternative, it is now establishing itself as a mainstream payment method. As merchant adoption accelerates and PSPs and banks continue to innovate around open banking technology, the market is entering a new era—one where instant, secure and data-driven account-to-account payments could redefine the future of digital transactions in the UK and beyond.