Rising card fees and chargebacks create unnecessary costs, while customers now expect instant, seamless payment experience. Pay-by-bank is the smarter alternative, and it’s growing impossible for businesses to ignore.
Pay-by-bank is an account-to-account payment method powered by open banking. Banks securely share APIs with licensed providers, and users authorise payments directly through their bank’s interface. The payment flow bypasses card networks entirely.
Some key advantages of pay-by-bank include speed, security, and customer-controlled consent. The UX is simpler, and costs are lower since card networks aren’t involved.
Now, let’s look at the stats – in 2018, there were just 320,000 pay-by-bank payments in the UK. By 2024, that number exploded to 224 million. The UK leads Europe, with 13% of digitally active consumers and 18% of small businesses already on board.
With the global market set to hit $164.8 billion by 2032, 2025 is the tipping point. Here’s why open banking is set to take off this year, and what will drive its rapid growth.
Digital natives are redefining payments
Many think that consumers are set in their payment methods, comfortable with cards and digital wallets, and don’t trust new technology. But this is changing with digital natives taking the central stage.
In 2025, Gen Z is making up nearly 30% of the global workforce. This generation grew up with smartphones, they don’t just prefer digital-first solutions – they expect them.
Take the success of challenger banks like Revolut in the UK. They exploded in popularity by offering fast, frictionless banking, unlike clunky legacy banks. It’s no surprise that 78% of millennials use mobile banking, and one-fourth have their primary bank account with a digital-only bank.
Gen Z takes it even further. They spend over four hours a day on social media, research products online, and drive social commerce. They trust innovation over traditional systems. Mastercard’s Rise of Open Banking study confirms it – Gen Z is the most eager to adopt cutting-edge fintech.
Millennials and Gen Z may not be the wealthiest yet, but they drive the future of e-commerce. Pay-by-bank is made for them – no card details, no extra steps, just a fast and UX-friendly account-to-account payment designed for speed, convenience, and security.
Businesses that understand how this audience thinks will get ahead. The question isn’t if pay-by-bank will take off – it’s how fast you’ll adapt.
— Lasma Kuhtarska, Co-founder, Chief Strategy Officer at Noda.
Regulatory breakthrough: IPR & PSD3
Strong APIs and smart regulation are key to accelerating pay-by-bank adoption. In 2025, not one but two major regulatory changes will drive it forward.
First, the EU’s Instant Payment Regulation (IPR) will require all banks and PSPs to offer instant euro payments, settled within 10 seconds, 24/7, across borders. That’s a massive shift from the previous 25-second standard, pushing banks to upgrade their systems fast. From January 2025, banks must be able to receive instant payments. By October 2025, they must also send them.
This is game-changing on its own, but combined with open banking, it directly challenges card networks. Faster payments, fewer intermediaries, and lower fees – it’s exactly what businesses and consumers want.
Another major shift is PSD3, set to roll out by 2026. It will fix key issues that slowed early open banking adoption. Banks will be required to provide stronger, high-performance APIs, ensuring better reliability and stability. They will have to publish API performance reports and remove unnecessary restrictions that previously made open banking clunky.
These regulations push banks to upgrade, making open banking faster, more reliable, and widely adopted. With instant payments and PSD3 accelerating growth, 2025 is the tipping point. Businesses that adopt early will stay ahead of the competition.
VRPs unlock recurring pay-by-bank in the UK
One of the biggest hurdles for pay-by-bank adoption has been its lack of flexibility for recurring payments. Unlike card-based payments or direct debits, traditional pay-by-bank required users to approve every single transaction – making them impractical for subscriptions, memberships, and other recurring payments.
But that’s changed. Variable Recurring Payments (VRPs) introduced long-lived consent, meaning customers authenticate once and set up a payment mandate with limits on amount and frequency. After that, payments happen automatically – no need to re-authenticate every time. Customers stay in control, with the ability to modify or cancel their mandates at any time.
In short, VRPs combine the convenience of open banking with the ease of direct debits and card-based subscriptions, and momentum is building for them. NatWest and HSBC have already launched VRPs for account transfers, and in May 2022, NatWest processed the UK’s first non-sweeping commercial VRP. Under the CMA order, the UK’s nine largest banks must support VRPs for sweeping, paving the way for broader adoption.
This shift removes the key barrier to pay-by-bank replacing traditional payment methods. With major banks rolling out VRPs, businesses that integrate pay-by-bank now will gain a first-mover advantage.
— Lasma Kuhtarska, Co-founder, Chief Strategy Officer at Noda.
Why 2025 is the best time to switch to pay-by-bank
Businesses know pay-by-bank is the future, but many may hesitate, fearing complex integration, limited payment options, and the risk of disrupting their current setup. That’s exactly why now is the time to act.
With the right partner, integrating pay-by-bank is simple. Noda removes the complexity, offering a smooth, plug-and-play solution that works with your existing payment flows. Businesses can still accept cards while seamlessly adding open banking for a more efficient and cost-effective checkout. It offers open banking APIs as well as ready-to-use plugins for e-commerce platforms, making setup effortless. For businesses without a custom-built checkout, no-code payment pages, payment links and QR codes allow them to start accepting pay-by-bank instantly.
