Martin Lewis has issued an urgent warning about using a popular payment option at online checkouts.
Speaking on X this week, the Money Saving Expert revealed that the new payment method provides very little protection for consumers.
Martin revealed that the ‘pay by bank’ option, which he claimed is on popular websites such as JustEat and RyanAir, could be dangerous for large transactions.
The payment method requires users to open their banking app to approve transactions, rather than entering card details.
Instead of processing as a card payment, the transaction is registered as a bank transfer. Users simply select their bank and log in via biometrics to complete the purchase.
Martin revealed that the ‘pay by bank’ option could be dangerous for large transactions
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The system has been promoted as the ‘next revolution’ in payments, eliminating the need for passwords or payment details.
But in an urgent statement, Lewis wrote: “WARNING: Have you started to notice “pay by bank app” options at online checkouts. If so it’s quicker, it’s easier but be aware there’s LITTLE PROTECTION.
“It’s on the likes of Just Eat and Ryanair. You don’t give card details, just pick your bank, and log into the app (via biometrics) then it’s done.”
The finance expert explained that as the transaction is processed as a bank transfer, customers “don’t get the same refund rights” if something goes wrong.
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“For small things, it’s no biggie,” Lewis noted. “But beware with big, important transactions.”
He emphasised that standard card payment protections like chargeback and Section 75 rights would not apply when using the pay by bank option.
Section 75 of the 1974 Consumer Credit Act gives customers the right to claim refunds for credit card purchases when things go wrong.
This protection applies to cases including poor quality goods, items that never arrived, or cancelled purchases.
Chargebacks offer similar protection for debit and credit card purchases, allowing customers to request refunds through their bank.
These vital consumer protections are not guaranteed when payments are processed as bank transfers.
The warning has resonated with consumers, with many social media users thanking Lewis for highlighting the risks of this payment method, particularly for larger purchases.
Lewis noted that payments to HMRC using this method were less concerning.
Lewis emphasised that standard card payment protections like chargeback and Section 75 rights would not apply when using the pay by bank option
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He said: “I’d be less worried about that (as long as its the real HMRC) as that’s something you may pay by bank transfer anyway.”
The finance expert indicated that HMRC payments wouldn’t typically come with “purchase protection” regardless of the payment method.
He also announced that more detailed information about the pay by bank app system would be coming soon on the MoneySavingExpert website.
