Realising the National Payments Vision: A step closer to a Pay by Bank scheme

The start of May saw 31 banks and fintechs commit to fund a new company dedicated to driving Pay by bank forward. This company will be the ‘Independent Central Operator’ that was backed by the FCA in January, to develop a commercial scheme which will unlock new ways to Pay by Bank, starting with recurring payments. This is a key step to realise the National Payments Vision’s ambition for Pay by Bank to become 'ubiquitous'. 

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“By uniting to fund a scheme operator, we’re laying the groundwork for Pay by Bank to power everything from utility bills and subscriptions to one-click checkouts and even in-store payments. This marks the beginning of a more open, competitive and frictionless future for UK payments.”

Francesco Simonechi , CEO and Co Founder of TrueLayer

In this article, we explore why a Pay by Bank scheme is needed, what it will do and what’s next.

What is Pay by Bank? 

Pay by Bank originated from 2017 legislation aimed at promoting competition in retail payments. It enables regulated providers to initiate secure payments directly from customer bank accounts. In the UK in March 2025 there were 27 million monthly transactions, compared to 15m in March the previous year. Importantly, all Pay by Bank providers are regulated by the FCA.

And further development of Pay by Bank — by adding features such as recurring payments — is a key aspect of the Government’s National Payments Vision, and featured in the FCA’s recent letter to the Prime Minister on ways it can support the Government’s growth mission.

Why do we need a Pay by Bank scheme? 

Since its inception, Pay by Bank has developed through a decentralised model, where each bank has built interfaces (APIs), which fintech providers like TrueLayer, connect to, in order to develop their own network of banks, and provide Pay by Bank as an online payment option which businesses can integrate into their apps or checkouts.

In this model businesses pay fintechs for the payment service, but fintechs don’t pay the banks for access to APIs. This is because legislation covering open banking prevents banks and fintechs from entering into contracts. This decentralised approach has been something of a double-edged sword for Pay by Bank. One one hand, it has kept costs low, reduced barriers to entry and therefore stimulated market entry leading to a surge in payments competition and innovation.

However, it has also disincentivised banks from investing in the interfaces they have built for open banking. The banks may view these interfaces as a cost centre and a compliance exercise, rather than an opportunity to bring new benefits for their consumers.

In order to maximise the progress of Pay by Bank, we’re seeing a new approach to create commercial incentives for banks, which move Pay by Bank from a regulatory exercise to a revenue driver.

Where does an independent central operator fit into all of this?

A scheme will complement the existing open banking framework and technology, by setting out and developing a consistent revenue flow between fintechs and banks which is managed centrally, avoiding the inefficiency of bilateral contracts between every fintech and every bank.

For a scheme like this to become reality, the Financial Conduct Authority (FCA) has backed the establishment of an independent central operator to oversee such a scheme, which will start by unlocking new recurring payments use cases in 2025.

The main role of the scheme operator is to act as a central contracting party for banks and fintechs. By entering into a contract with the operator, banks and fintechs will agree to scheme rules and commercial arrangements on a multilateral basis.

The scheme rule book will tell banks and fintechs what they need to do to participate in the scheme. For example: banks must support APIs for recurring payments, and fintechs must pay a certain amount to banks to access those APIs.

It will benefit both banks and fintechs. Banks will obtain fees for providing API access, and scheme rules will further improve how Pay by Bank performs and is supported by banks.

Initially, the scheme operator will be focused on the roll out of recurring payments for utilities, government and financial services use cases. The pricing proposals for this phase have been developed by Frontier Economics.

How does a scheme operator differ from Open Banking Limited?

Open Banking Limited (OBL) is the body that was tasked with developing API standards, which banks have implemented to support Pay by Bank.

The proposed scheme isn’t meant to develop API standards (at least initially), which would duplicate the role of the OBL. Rather, it will enable the banks to monetise the APIs they have built under the direction of OBL through developing and maintaining a commercial model. The scheme will also develop rules around, for example:

• the new use cases that are supported using open banking APIs

• how these use cases work for consumers

• how disputes are managed between banks and fintechs and how liability is apportioned

• branding and trust marks

These are all tasks that benefit from central coordination between banks and fintechs, which has so far been lacking. 

Unlike some existing payment schemes, the Pay by Bank scheme will not maintain central payments infrastructure. Pay by Bank will remain de-centralised, and API based. This is key to maintaining the efficiency and healthy competition we see today with Pay by Bank where multiple fintechs create competing payment networks through connecting to banks APIs, rather than connecting to a central technology.

What’s next?

There are some key building blocks to get the new scheme off the ground:

• Development of a Multilateral framework (MLA) - this is the rulebook which tells participants of the scheme how they should support new Pay by bank functionality, such as recurring payments. Open Banking Limited consulted on an MLA in January 2025, and we understand the MLA will be finalised by July.

• Funding and Incorporation of the Operator - this will be a company/ legal entity, which scheme participants contract with, as opposed to having to have separate contracts between all banks and fintechs. The set-up of the company is planned for completion in H2 2025.

• Development of a Commercial model - the framework for remunerating banks for supporting new Pay By Bank features, such as recurring payments - there are two separate commercial models being developed - one by Frontier (for utility, financial services and Government use cases, and one by Deloitte (for broader use cases, such as ecommerce). The results of this work will inform how much fintechs pay banks to access new functionality available under the scheme.

Once these building blocks are in place in 2025, fintechs like TrueLayer should be able to offer new ways to Pay by Bank.

Ready for what’s to come?

If your business is looking to stay ahead, now is the time to understand where Pay by Bank is really heading.

→Download the full Pay by Bank update 2025. Inside, you’ll find the detailed roadmap for VRPs, insights into the scheme structure, and what it means for your checkout experience, customer experience and bottom line.