Pay-by-Bank, what is it?

Dutch people mainly use iDEAL|Wero for online payments, for example in online shops. After 20 years, virtually every Dutch person knows what it is and how to use it. Recently, a new online payment method has been in the news: Pay-by-Bank. This allows you to pay online via your own bank’s mobile app or secure website, just like with iDEAL|Wero. What exactly is Pay-by-Bank, who owns it, and how does it differ from iDEAL|Wero?

Pay-by-Bank(opens in new window) is a simple name for something that exists since 2019: a direct electronic transfer which, thanks to the European Payment Services Directive 2 (PSD2), can be initiated digitally by, for example, an online shop with the buyer’s bank. It is a form of Open Banking whereby the amount and beneficiary are pre-populated for the buyer at their bank, and the buyer simply needs to give a secure digital authorisation, either via the mobile app or secure website of his or her own bank.

Anyone is free to use the name ‘Pay-by-Bank’ for this type of payment; it is not a protected trademark. These payments are now offered to online retailers by various payment services providers (PSPs) under the name ‘Pay-by-Bank’.

No one and everyone owns Pay-by-Bank

How does this differ from iDEAL|Wero and, in future, from Wero? The iDEAL|Wero brand name will disappear and will be entirely replaced by Wero during 2027. iDEAL and Wero have a single brand and product owner: EPI Company. It oversees the entire process and ensures that a standard iDEAL|Wero or Wero payment always appears and works the same way, across all PSPs and online retailers. A PSP wishing to offer iDEAL|Wero or Wero as a payment method to online shops, must enter into an agreement with EPI Company and must comply with its rules and guidelines.

Pay-by-Bank is a technical approach that every PSP can design and implement themselves. The PSP does not need to enter into an agreement with a brand or product owner. The rules and guidelines are set out in general European legislation and regulations. As a result, Pay-by-Bank may look very different from one online shop to another, when they use different PSPs. Pay-by-Bank belongs to no one and to everyone.

Purchase protection or not?

The features of Pay-by-Bank and Wero will start to diverge from 2028 onwards. Wero will then offer ‘purchase protection’ for buyers at many online shops and institutions. Pay-by-Bank will not offer this purchase protection, just as iDEAL|Wero does not offer it.

With iDEAL|Wero and Pay-by-Bank, every payment is ‘irrevocable’; once paid, it is final. The buyer can only request a refund from the seller. With Wero, in many cases the buyer can request a refund from their own bank if the seller fails to deliver and the buyer and seller do not come to a mutual agreement on a replacement or refund.

More choice and competition

In time, Wero will offer more payment options, such as automatic monthly payments for a recurring subscription and contactless payments with a smartphone at physical points-of-sale. These types of payments are not expected for Pay-by-Bank.

Pay-by-Bank offers single online payments that are similar in many respects to the old iDEAL. It leads to more choice and competition amongst online payment methods.