Pay by Bank allows 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. It has been used by HMRC and other Government departments for several years, and last year became an option for payments in store as well.
It’s even listed as the default payment option on the RyanAir website, meaning that many more people are likely to use it as they book travel this summer.
However, Jenny Ross, Which? Money Editor, said those who use the service miss out on the protections they might receive when paying with credit or debit cards, such as Section 75 or chargeback protections.
Section 75, which applies if you use a credit card and buy an item worth over £100, allows customers to claim money back from the credit card company if an item does not arrive or is faulty and the company will not refund them. The chargeback scheme, which is voluntary, does the same for debit cards.
Ross 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.
Why Life Insurance Still Matters – Even During a Cost-of-Living Crisis
Sponsored by Post Office
“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.”
Pay by Bank benefits
Ross said the Pay by Bank method has many good points, but needs to be reformed so that these crucial protections are in place.
“It’s a potential game-changer 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,” she added.
Consumers unaware
Which? studies have shown that consumers were unaware that they did not have the same protections if they use the new system as when they pay with a credit or debit card.
Which? carried out a nationally representative survey of over 2,500 adults in March this year, and only one in eight (13%) people 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.
As well as Ryanair, 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.
