The economics of Pay by Bank: where the real savings come from

Pay by Bank is often called a lower-cost payment method. That's accurate. But it only captures part of the picture.

The real advantage isn't a single fee reduction. It's a fundamentally different cost structure, one that compounds across transaction fees, fraud exposure, failed payments, and operational overhead.

The fee problem with cards

Card payments run through multiple layers: acquirers, card networks, and issuing banks. Each adds its own fees. Interchange alone typically ranges from 1.5% to 3.5% per transaction in most markets, and that's before scheme fees and acquirer margins are added.

For a business processing AED 10 million a month, that fee structure represents hundreds of thousands of dirhams in payment costs annually, before a single chargeback or failed transaction is factored in.

Pay by Bank removes most of those layers. Payments move directly between accounts. Fewer intermediaries means a materially lower cost per transaction, typically a fraction of card processing rates.

Fraud and chargebacks: a structural difference

The merchant initiates the transaction, which creates inherent fraud exposure. Global card fraud losses exceeded $33 billion in 2022, with merchants bearing a significant share through chargebacks and dispute costs.

Pay by Bank provides an added security element. The customer initiates and authorises the payment directly at their bank. There are no stored card credentials to compromise and no chargeback mechanism. In the UK, Open Banking payment providers have reported fraud rates significantly below the card industry average, with some reporting near-zero chargeback exposure.

For high-volume businesses, that difference is not marginal. It is structural.

Failed payments: the hidden cost

Card payment failure rates typically sit between 5% and 15%, driven by expired cards, insufficient funds, and network issues. Each failed payment carries a cost: retry processing, customer drop-off, and operational follow-up.

Real-time bank-to-bank payments significantly reduce failure rates. Authorisation happens at the point of payment, funds availability is confirmed instantly, and the customer is in the flow. UK data shows Open Banking payment success rates consistently outperforming card equivalents, particularly for higher-value transactions.

Reconciliation: where time becomes money

Traditional card settlements take 2 to 5 business days, arrive in batches, and require significant manual effort to match against orders and invoices. For finance teams at high-volume businesses, reconciliation is one of the most resource-intensive processes they manage.

Pay by Bank delivers real-time confirmation with transaction-level data attached. Matching is automated. Settlement is instant. European businesses that have moved to account-to-account payment rails report significant reductions in reconciliation overhead, with some cutting manual finance effort by 30% or more.

What this looks like in the UAE

In the UAE, AlTareq, the national Open Finance framework regulated by the Central Bank of the UAE, standardises how payments flow between banks and licensed providers. Spare connects to AlTareq as a licensed TPP. Merchants integrate once and access the full bank network, with consent, payment initiation, and settlement all handled on our side.

No fragmentation. No inconsistency. Direct rails, lower cost, and real-time confirmation across every participating bank.

The compounding effect

Individually, each saving looks incremental. Together, they compound.

A business processing AED 50 million annually that reduces its effective payment cost by 1.5 percentage points saves AED 750,000 per year. Add reduced fraud losses, fewer failed payments, and lower reconciliation overhead, and the total economic impact is material.

This is where Pay by Bank stops being an alternative payment method and becomes a lever for economic optimisation.

The bottom line

The economic value of Pay by Bank doesn't come from one saving. It comes from removing cost at every layer of the payment lifecycle, from the transaction fee through to the finance team's monthly close.

For businesses processing payments at scale, that shift isn't marginal. It's material.

Ready to see what the numbers look like for your business?
Let's talk → business@tryspare.com