Verified Bank-to-Bank Payments: Open Banking Guide | Paytia
When customers make payments directly from their bank account through open banking, they're not just choosing a payment method-they're choosing trust, speed, and security. But how does identity verification work in these bank-to-bank transactions, and how can businesses ensure customers feel confident clicking that payment link?
Let's explore how open banking, verified payments, and Paytia's Secure Code technology work together to create a smooth, trustworthy payment experience.
What's Open Banking and How Does It Enable Verified Payments?
Open banking is a regulated framework (governed by PSD2 in the UK and EU) that allows customers to authorise third-party providers to access their bank account data or initiate payments on their behalf-directly through their banking app.
Unlike traditional card payments where you enter card details on a merchant website, open banking payments work differently:
- Customer receives payment request: Via SMS, email, or chat-often as a secure payment link
- Customer clicks the link - They're redirected to their own banking app or online banking portal
- Bank verifies identity: Using the bank's own multi-factor authentication (fingerprint, Face ID, PIN, one-time passcode)
- Customer authorises payment: They review the amount and recipient, then approve
- Payment is instant: Money transfers directly from customer's account to merchant's account-no intermediary holding funds
The key advantage: identity verification happens inside the customer's trusted banking environment, using security measures they already know and trust.
How Paytia Helps Businesses Offer Verified Pay by Bank Payments
Paytia integrates with open banking infrastructure (through partners like Fena and Acquired.com) to enable businesses to accept verified bank-to-bank payments without the complexity of direct bank API integration.
The Paytia Pay by Bank Journey
Step 1: Business sends payment request
Using Paytia's Advanced Payment Links, businesses can generate secure payment links with:
- Pre-filled amount and reference details
- QR codes for mobile convenience
- Optional Paytia Secure Code for verification
- Delivery via SMS, email, or web chat
Step 2: Customer receives and verifies the link
Here's where Paytia Secure Code becomes important. Customers receive a 4-digit security code separately (via phone call, SMS, or agent confirmation) that proves the payment link is legitimate-not a phishing attempt. Dramatically increases trust.
Step 3: Customer opens their banking app
Clicking the payment link redirects the customer to their own bank's authentication flow-entirely within their banking app where they feel secure and in control.
Step 4: Bank verifies customer identity
The customer's bank uses its own security measures:
- Biometric authentication (fingerprint, Face ID)
- Banking app PIN
- One-time passcodes (OTP)
- Device recognition
This verification is bank-grade security-typically much stronger than traditional card payment authentication.
Step 5: Customer approves the "Request to Pay"
Once authenticated, the customer sees the payment details clearly displayed in their banking app:
- Who is requesting the payment (business name)
- How much is being requested
- What the payment reference is
- When the payment will be processed
They review and approve with a single tap-payment is instant and confirmed in real-time.
Why Paytia Secure Code Increases Trust in Payment Links
Payment link fraud and phishing attempts are rising. Customers are (rightly) cautious about clicking links claiming to be payment requests. Is where Paytia's Secure Code verification provides a critical trust layer.
How Secure Code Works
When a business sends a Paytia payment link, they can enable Secure Code protection:
- Business generates payment link with Secure Code (4-digit code automatically created)
- Link is sent to customer via primary channel (email/SMS/chat)
- Security code is communicated separately via secondary channel (phone call from agent, separate SMS, verbal confirmation)
- Customer enters the code before accessing the payment page
- Code validates-customer knows the link is legitimate, from the real business
Why This Matters for Verified Payments
Combining Secure Code with open banking identity verification creates a double-layer trust model:
- First layer - Secure Code proves the payment request is legitimate (not phishing)
- Second layer - Bank verifies the customer's identity before releasing funds
This dramatically reduces fraud risk from both directions-fake payment links AND unauthorised account access.
Benefits of Verified Bank-to-Bank Payments for Businesses
1. Higher Conversion Rates
Customers trust their bank's authentication more than entering card details on merchant websites. Pay by bank reduces payment friction because customers authenticate in a familiar, trusted environment-their own banking app.
2. Lower Processing Costs
Open banking payments typically have lower transaction fees compared to card payments, as they eliminate card scheme interchange fees and card network costs. The exact savings depend on your payment volume and current card processing rates.
3. Instant Settlement
Unlike card payments that settle in 2-3 days, open banking payments are instant and irrevocable. Money arrives in your business account immediately-improving cash flow.
4. Reduced Fraud and Chargebacks
Because the customer's bank verifies their identity and they explicitly approve the payment in their banking app, chargebacks are virtually eliminated. The payment is authorised, authenticated, and confirmed in real-time.
5. PSD2 Compliance Built-In
Open banking is regulated under PSD2 Strong Customer Authentication (SCA) requirements. When customers approve payments in their banking app, they're automatically using SCA-compliant verification-no additional compliance burden for your business.
Use Cases: Where Verified Bank Payments Excel
High-Value Transactions
For large purchases (insurance premiums, professional services retainers, equipment purchases), customers appreciate the security of bank-verified payments. The identity verification gives both parties confidence.
Subscription and Recurring Payments
Once a customer sets up a bank payment mandate, ongoing payments are pre-authorised and instant. No declined cards, no expired payment methods-just reliable, verified recurring payments.
Invoice Payments (B2B)
Business customers can review invoices, verify payment details in their banking app, and approve payment instantly without manual bank transfers or cheque writing.
Regulated Industries (Legal, Healthcare, Insurance)
Industries handling sensitive customer data benefit from not storing payment card information. Open banking means payment data never touches your systems-the bank handles everything securely.
How to Implement Verified Pay by Bank with Paytia
Paytia makes it simple to add verified bank payments to your payment options:
Step 1: Enable Pay by Bank in Your Paytia Account
Connect your business bank account through Paytia's open banking integration (powered by Fena or Acquired.com connectors). Setup takes under 10 minutes-no lengthy merchant approval processes.
Step 2: Generate Payment Links with Secure Code
Use Paytia's Advanced Payment Links feature to create verified payment requests:
- Enter payment amount and reference
- Enable Secure Code verification (4-digit code)
- Choose delivery method (SMS, email, QR code)
- Set expiry time if needed
Step 3: Communicate Security Code to Customer
Send the 4-digit Secure Code via a separate channel (phone call from agent, separate SMS, verbal confirmation during call). Proves the link is legitimate.
Step 4: Customer Completes Payment in Their Banking App
Customer clicks link, enters Secure Code, selects their bank, authenticates in banking app, reviews payment details, and approves. Payment is instant and confirmed.
Step 5: Real-Time Confirmation and Settlement
Paytia provides instant webhook notifications when payment completes. Money is in your account immediately-no waiting periods.
Comparing Verified Bank Payments vs Traditional Payment Methods
| Feature | Verified Pay by Bank | Card Payments |
|---|---|---|
| Identity Verification | Bank-grade multi-factor authentication | CVV code (static security) |
| Processing Cost | 0.5% + £1.00 | 2.9% + 30p |
| Settlement Speed | Instant (real-time) | 2-3 business days |
| Chargeback Risk | Virtually eliminated | 0.5-1.0% of transactions |
| Customer Trust | 89% prefer (familiar banking app) | Card fraud concerns |
| PSD2/SCA Compliance | Built-in | Requires 3DS2 implementation |
Security Considerations: How Verification Protects Both Parties
For Customers
- Paytia Secure Code confirms the payment link is legitimate (anti-phishing)
- Bank authentication ensures only they can authorise the payment
- In-app review shows exactly what they're paying and to whom
- No card data shared with merchants reduces data breach risk
For Businesses
- Bank verification confirms the customer's identity and account ownership
- Real-time authorisation means payment is guaranteed before goods/services are released
- No chargebacks because customer explicitly approved in their banking app
- Audit trail shows customer authenticated and authorised the transaction
The Future of Verified Payments: Request to Pay Adoption
The UK's open banking infrastructure supports "Request to Pay" (RtP)-a standardised way for businesses to request payment directly through a customer's banking app. Unlike sending an invoice and waiting for manual bank transfer, RtP enables:
- Instant payment requests delivered directly in banking apps
- One-tap approval from authenticated customers
- Real-time settlement with payment confirmation
- Lower fraud rates due to bank-side verification
Paytia's integration with open banking providers means businesses can leverage RtP capabilities without building direct bank integrations.
Common Questions About Verified Bank-to-Bank Payments
Do customers need to download a new app?
No. Customers use their existing banking app (the one they already have from their bank). Paytia's payment links redirect customers to their bank's authentication flow-no new apps or registrations required.
Which UK banks support open banking payments?
All major UK banks support open banking under PSD2 regulations, including: Barclays, HSBC, Lloyds, NatWest, Santander, Nationwide, TSB, Metro Bank, Monzo, Revolut, Starling, and many more.
Is identity verification required for every payment?
Yes, for security and PSD2 SCA compliance. But, the authentication is quick (biometric or PIN in banking app) and familiar to customers-typically faster than entering card details and completing 3DS2 challenges.
What if a customer doesn't have online banking?
For customers without online banking access, businesses can still offer traditional payment methods (card payments, phone payments via DTMF suppression) as alternatives. Mobile banking adoption continues to grow across the UK, with most customers now having access to banking apps.
How does Paytia Secure Code work with bank verification?
Paytia Secure Code is an additional trust layer before bank authentication. When customers receive a payment link, they also receive a 4-digit code (via separate channel). They enter this code to access the payment page-proving the link is legitimate. Then they proceed to their banking app for identity verification and payment approval. It's a double-verification approach: code proves link legitimacy, bank proves customer identity.
Getting Started with Verified Bank Payments
If you're ready to offer customers a faster, more secure payment option with lower processing fees and instant settlement, here's how to start:
- Review your current payment mix: Identify which transactions would benefit most from bank payments (high-value, recurring, B2B invoices)
- Enable pay by bank in your Paytia account - Quick setup connects you to UK open banking infrastructure
- Train your team on Secure Code usage - Ensure agents know how to communicate verification codes to customers
- Test the customer journey - Walk through the payment flow from link generation to bank app approval
- Monitor conversion and feedback - Track how customers respond to the new payment option
Visit our Pay by Bank solutions page to learn more about pricing, features, and integration options.