**Consumers Urged to Reconsider ‘Pay by Bank’ Option Due to Lack of Purchase Protection**
Shoppers across the UK are being cautioned about potential pitfalls when choosing new ways to pay, as industry watchdogs express concern over the growing popularity of the “pay by bank” payment method. Which?, a leading consumer advocacy group, has issued a warning highlighting what it calls a significant “protection gap” for buyers who opt for this increasingly common transaction type.
The rise of “pay by bank” facilities has made settling bills, paying credit card statements, and even making retail purchases more convenient. The method allows money to be transferred directly from the consumer’s bank account to the retailer without the need for inputting card information or bank details. Whilst this has been praised as both quick and secure, questions remain about the security net for shoppers if something goes wrong with their purchase.
Unlike credit or debit card payments, “pay by bank” transactions are not shielded by the protection afforded under Section 75 of the Consumer Credit Act, nor do they benefit from the voluntary chargeback schemes offered by many banks and card providers. Section 75 is widely recognised as an essential safeguard – if a purchase turns out to be faulty, misrepresented, or does not arrive, cardholders may have an avenue to claim their money back from the credit card company if the merchant refuses to refund. Similarly, debit card users can sometimes seek redress through a chargeback process.
However, these safety measures simply do not exist in the same way for “pay by bank” users. Which? has described this method as a potential “game changer” for businesses, mainly because it allows retailers to evade card payment processing fees and enjoy instant access to customer funds. For consumers, the key advantages touted include instantaneous refunds and no need to share sensitive card details, reducing exposure to card data theft.
Yet, the consumer group stresses these benefits come with clear limitations. While general rights exist under the Consumer Rights Act – stipulating that products must be as described and of satisfactory quality – enforcing such rights can be cumbersome. In many instances, dissatisfied customers may ultimately need to resolve disputes in the small claims court, which is often a lengthy and intimidating process for individuals.
The lack of robust protection is particularly concerning for larger purchases or future-dated transactions, such as flight bookings, festival tickets, or expensive household items like furniture. If a company collapses before delivering the goods or service, those who paid “by bank” could find themselves facing significant financial loss, according to Which?.
Jenny Ross, Which? Money editor, summarised the issue: “Innovations like pay by bank present opportunities for both consumers and businesses, but these come with risks, especially since the purchase protections common with card payments aren’t in place. Until regulators take action, we strongly advise consumers to stick to traditional credit or debit cards for major purchases or event bookings.”
Representatives from the banking and payments sector have also weighed in. UK Finance, the banking trade body, acknowledged the variety of payment alternatives on the market but emphasised the importance of being aware of the various protection levels each method offers, especially for high-value transactions.
Riccardo Tordera-Ricchi from the Payments Association recognised the efficiency and security enhancements that “pay by bank” brings, but supported the call for heightened consumer awareness. He highlighted Section 75 as a benchmark for consumer protection, reinforcing the need for clear information on the strengths and weaknesses of all payment types.
Meanwhile, Tom Burton of GoCardless – a company specialising in bank-to-bank payment technology – pointed out that lower transaction costs for merchants often translate to better prices for customers. However, he agreed there is work to be done to ensure protections keep pace with innovation, suggesting collaboration between government, regulators, and industry is essential.
In summary, whilst “pay by bank” payments offer modern convenience and potential benefits for both shops and customers, the present lack of built-in buyer safeguards means that, for now, traditional card payments may offer more robust recourse if something does go wrong. Until regulatory agencies address these gaps, shoppers are urged to weigh their options carefully, particularly when substantial sums of money are at stake.