BBC Expert Issues Alert Over Amazon's New Pay-by-Bank System
A BBC consumer expert has raised serious concerns about the growing adoption of pay-by-bank systems by major retailers like Amazon and airlines, warning that this payment method significantly erodes key consumer protections. Peter Ruddick, speaking on BBC Breakfast, highlighted a massive surge in usage, with over 36 million transactions in the UK in January 2026 alone, up 4% month-on-month, but cautioned that shoppers may be sacrificing vital safeguards for convenience.
How Pay-by-Bank Works and Its Rapid Growth
Pay-by-bank allows customers to transfer funds directly from their bank accounts without entering debit or credit card details, using methods akin to traditional bank transfers or QR codes. Ruddick explained that its adoption has skyrocketed due to big operators like Amazon and airlines embracing it, alongside physical stores exploring its use. He noted that HMRC also utilises it for many payments, a shift from just two years ago when it was less widespread.
The primary driver for retailers is cost savings: by avoiding expensive credit card fees, which cost UK retailers nearly £1.5 billion annually, they can use a system with much lower, often fixed fees. However, Ruddick emphasised that while this benefits companies, consumers gain few advantages beyond ease and convenience.
Critical Loss of Consumer Protections
The core issue, as outlined by Ruddick, is the removal of essential protections: pay-by-bank transactions do not qualify for Section 75 of the Consumer Credit Act or chargeback schemes. Section 75 protects credit card purchases over £100 and under £30,000, making card companies jointly liable for issues like faulty goods or retailer insolvency. Chargeback protections, available for debit and credit card purchases of any value, allow card providers to reclaim money in various circumstances, including if a retailer goes bust.
Consumer rights champion Scott Dixon echoed these warnings to Sky Money, stating that pay-by-bank eliminates or diminishes these robust refund routes, leaving shoppers stranded if retailers refuse refunds, deliver faulty items, or collapse. He advised avoiding bank transfers for big-ticket purchases like holidays, electronics, or advance bookings, and instead using credit cards for deposits over £100 or debit cards for smaller amounts to retain protections.
Mixed Benefits and Regulatory Calls
Consumer group Which? acknowledged some benefits, such as instant refunds and reduced risk of card detail theft, but stressed that protections under the Consumer Rights Act are harder to enforce. If a retailer refuses a refund, consumers must resort to small claims court, a costly and time-consuming process. Jenny Ross, Which? Money Editor, called for regulators to ensure confidence in pay-by-bank, but urged caution for now, recommending traditional cards for substantial purchases.
An Amazon spokesperson defended the system, stating that customer protection policies apply equally across all payment methods, with purchases covered by return policies and the A-to-Z Guarantee for third-party sellers. They added that Pay by Bank transactions are protected under UK Payment Services Regulations for up to 13 months and offer faster refunds.
Despite these assurances, experts warn that the loss of Section 75 and chargeback leaves a significant gap in consumer safety, urging shoppers to weigh convenience against potential risks carefully.
