The new ‘pay by bank’ service uses open banking technology to allow customers to authorise payments in their banking app or online, removing the need to enter card details, logins or passwords.

It means investors depositing cash can invest it the same day, allowing retail customers to buy shares, funds or investment trusts more quickly and with less potential for prices to change before purchases can be made.

George Rodgers, senior product manager at Hargreaves Lansdown, called the new payment method “a step change in the payments experience”.

He said: “Our clients can expect a simpler payment journey as well as instant settlement for deposits and withdrawals compared to days under the current system.”

What is pay by bank?

Pay by bank services use the open banking framework to connect accounts held with different companies. Using an API feed, authorisation can be granted and money transferred instantly from one account to another when making purchases or depositing funds.

The connection is encrypted and completely secure, allowing payments without the need for customers to share their banking details with third parties.

In theory, this makes it much harder for fraud to occur as confidential information is not exchanged.

How do I use pay by bank?

Pay by bank is a relatively new payment method, made possible only after the adoption of open banking standards which have been gradually introduced over the past five years.

Not all banks and current account providers offer the service yet, though HSBC and Barclays were early adopters.

If your bank does have a pay by bank option and the retailer or provider you want to transact with offers the service, you can select it as your payment method at checkout.

It means you don’t need to set up an account with the retailer you want to buy from, leaving you free from having to remember long lists of login usernames and passwords.

Pay by bank also bypasses card networks and interchange fees which brings cost savings as well as making the whole payment experience much simpler, faster and more secure.

Hargreaves Lansdown has partnered with Ecospend to support the new service from today. The technology firm won the largest open banking contract with HMRC in early 2021 and now processes payments for Self-Assessment, VAT, Corporation Tax and PAYE.