When Visa formally switched on its Pay-by-Bank rail in the UK on 2 June 2025, the headline feature was not speed—open-banking payments have been real-time for years—nor reach, thanks to Faster Payments. The news was the guarantee: a card-style dispute-resolution rule set that promises to reimburse consumers if a transfer goes wrong. Visa says the scheme gives account-to-account (A2A) payments “a similar level of protection typically associated with cards,” positioning Pay-by-Bank as a like-for-like alternative at checkout.
The move arrives at a delicate moment for open banking. Despite impressive growth—Open Banking Limited recorded 130 million UK payments in 2023, up 90% year-on-year—cards still account for more than three-quarters of UK e-commerce volumes. Consumer surveys repeatedly point to two blockers: habit and fear of losing chargeback rights. Visa’s guarantee tackles the second.
What the Guarantee Actually Covers
Details sit inside the Visa Product & Service Rules, but public statements outline three pillars:
- Reimbursement for unauthorised or erroneous payments (mirroring card “zero liability” rules).
- A formal dispute-resolution window in which consumers can raise a claim via their bank app.
- Scheme-level arbitration if the merchant and consumer fail to agree.
Under the hood, the service rides Pay.UK’s Faster Payment System. Visa’s API handles tokenisation, transaction messaging and dispute flows; settlement occurs in near real time, while the guarantee obliges participants to prefund a liability pot for refunds.
Why Protection, Not Price, May Be the Catalyst
Open-banking advocates have long pitched A2A as cheaper and faster than cards, yet adoption in high-income markets has lagged. A recent Financial Times piece noted that consumer awareness, trust and card incumbency still hinder Pay-by-Bank growth in Britain “despite years of investment”. Visa’s own 2024 Nordic study found that fully 48% of respondents would try A2A “only if buyer protection matched cards.” In other words, price is secondary; perceived safety is primary.
Merchant maths tell a similar story. Card acquiring fees average 1.4% in UK online retail, yet many merchants hesitate to remove cards because a single high-profile fraud event costs more—in refunds and reputation—than the savings from cheaper rails. Visa’s guarantee shifts that risk calculus: merchants still pay a (yet-undisclosed) service fee, but the liability for fraud or non-delivery now sits inside a familiar rulebook rather than in bespoke contracts.
The Scale of the Opportunity
If protection closes the trust gap, Pay-by-Bank could eat into the “everyday card” segment: utilities, telecoms, streaming subscriptions and, eventually, one-click retail. Visa claims that broader A2A adoption could unlock £328 billion in UK economic output across five years. Even a modest share shift—say 5% of the UK’s £250 billion annual e-commerce spend—would reroute over £12 billion through Faster Payments.
For banks the draw is stickier users and fee income on dispute processing; for fintech aggregators like Plaid the prize is richer transaction metadata (mandate IDs, refund statuses) that they can resell to merchants for reconciliation.
Questions Visa Hasn’t Answered Yet
Who funds refunds?
Card schemes push chargeback costs to acquirers, who pass them to merchants. Visa’s Pay-by-Bank will need a similar waterfall—likely a prefunded pool plus merchant debit—yet participants have not disclosed fee tables. Without clarity, merchants cannot model total cost of acceptance.
Will banks throttle volumes?
Open-banking APIs still suffer time-outs: Open Banking’s April dashboard showed a 0.47% failed-call rate and 0.14% outright rejects. If disputes rise, some banks may cap transaction sizes or velocities, limiting the scheme’s appeal for high-ticket merchants.
Can the guarantee scale beyond the UK?
The launch is UK-only, leveraging Faster Payments’ instant settlement and Pay.UK’s central infrastructure. Replicating protections in the eurozone would mean mapping to SCT Inst and myriad local consumer-protection regimes; in the US, FedNow has no scheme-level guarantee. Visa must convince regulators—and banks—that its rules can sit atop disparate clearing houses.
Competitive Ripples
Mastercard, which entered open-banking via its 2019 acquisition of Finicity, already pilots a “liability shift” for account-based payments in the Netherlands. Specialist PISPs such as TrueLayer and GoCardless tout variable recurring payments (VRP) with optional insurance wrappers. Visa’s move may force rivals to hard-bake indemnities rather than sell them as add-ons.
Card issuers face a defensive dilemma: encourage Pay-by-Bank to keep volume inside the Visa/Mastercard orbit, or resist and risk ceding ground to open-banking-native challengers. Early evidence suggests embrace: Nationwide and NatWest appear on Visa’s partner list, betting that a bank-branded app journey beats a third-party overlay.
Regulatory and Consumer-Duty Context
The UK’s Consumer Duty pricing-transparency review in May 2025 put cross-border providers on notice for muddled fee disclosures. Domestic A2A players felt the tremor, too: any “zero-fee” claim must show FX mark-ups and dispute-resolution timelines. Visa will need to publish its guarantee rules in plain English and prove that refunds arrive promptly—standards already baked into card chargebacks.
On the infrastructure side, the Joint Regulatory Oversight Committee (JROC) is drafting mandatory service-level agreements for open-banking APIs. If SLAs land near card-network uptime (99.999%), A2A could become a high-availability rail suitable for energy and telecom direct debits, not just ad-hoc P2P transfers.
Merchant Economics: Case Scenarios
Utility bills – A water company paying 0.9% interchange on card autopay could cut the fee to perhaps 0.3% under Visa A2A (exact pricing TBD) and gain instant settlement. The catch: integration. IT teams must map mandate IDs to legacy billing cycles.
E-commerce checkout – A £45 apparel order routed via A2A saves 60 pence in fees versus cards, but the retailer must still cover the guarantee risk component. If that premium lands at ~0.2%, net savings fall to ~0.5%—a margin but not a revolution.
Subscriptions – For streaming services wrestling with chargeback fraud, a bank-verified mandate plus Visa guarantee could lower involuntary churn and clawback costs. But acquiring gateways will compete aggressively on blended pricing; merchants may demand a revenue-share to migrate users.
Consumer Experience: Will They Click?
Friction matters. Card-on-file requires no extra step; Pay-by-Bank asks for authentication inside the banking app. Though Visa claims a single mandate can enable one-click repeat use, the first checkout step remains longer than typing the CVV. Unless merchants surface explicit benefits—“instant refund if we ship late,” “no credit-card surcharge”—consumer inertia may persist.
Trust is the wildcard. A 2024 Visa survey found 72% of UK adults “feel safer” knowing a retail purchase can be reversed; only 38% said the same about bank transfers. The guarantee must close that perception gap quickly, otherwise protection exists only on paper.
Outlook: Necessary, Not Sufficient
Visa’s guarantee is a critical puzzle piece for A2A adoption, but not a silver bullet. Protection narrows the trust deficit; experience (fast, low-friction auth) and economics (meaningful savings after scheme fees) must follow. Regulators will scrutinise transparency under Consumer Duty, and banks will demand a revenue share commensurate with risk.
Still, the launch reframes the conversation. Pay-by-Bank is no longer a low-cost, high-risk alternative; it is a premium rail backed by the same dispute machinery that built card dominance. Whether that promise convinces shoppers to click “Pay from Bank” instead of “Visa” is the question every merchant, PISP and issuing bank will watch over the next holiday peak.
