Card vs Bank Transfer for Business Payments: A Practical UK Guide

How card payments actually work

A card payment looks like one transaction to your customer, but behind the scenes it is a chain. When a card is used, an acquirer processes the payment on your behalf, the card scheme (Visa or Mastercard) routes it, and the customer's bank (the issuer) authorises and funds it. Each link takes a cut, which is why the headline rate your provider quotes is built from several layers.

The largest regulated layer is interchange, a fee paid to the customer's card issuer. Under the retained UK Interchange Fee Regulation, interchange is capped at 0.2 per cent of the transaction value for consumer debit cards and 0.3 per cent for consumer credit cards, caps that have applied since 9 December 2015 according to the Payment Systems Regulator. On top of interchange sit scheme and processing fees charged by Visa and Mastercard, and the acquirer's own markup. Businesses pay all three layers combined.

Two things are worth flagging. First, the caps only cover consumer cards where the merchant, acquirer and issuer are all in the UK; commercial cards and most American Express transactions fall outside them. Second, scheme fees are not capped. The PSR's final report on card scheme and processing fees found that Visa and Mastercard increased their core scheme and processing fees to acquirers by at least 25 per cent since 2017, adding at least 170 million pounds a year to UK business costs.

How bank transfers and open banking work

A bank transfer moves money directly from the payer's account to yours. In the UK this usually runs over the Faster Payments rail, which settles near-instantly and operates around the clock, including weekends and bank holidays. Traditionally a customer typed your sort code, account number and a reference into their banking app. That works, but it is manual and error-prone.

Open banking modernises this. Instead of the customer copying details across, a payment request is pre-populated and the customer simply approves it inside their own banking app using biometrics or a passcode. The money still travels over Faster Payments, but the payer's details are filled in automatically, which cuts mistakes and abandoned checkouts. Open Banking Limited reports that single domestic open banking payments grew 52 per cent across 2025, and that user connections reached 16.5 million by December 2025.

Because the money is pushed straight from account to account, there is no interchange, no card scheme in the middle and no acquirer markup. That is the structural reason account-to-account payments can undercut cards on cost, particularly for higher-value transactions where a percentage-based card fee bites hardest.

The cost comparison

On cost, the two rails are built differently. Card fees are largely proportional to transaction value, stacking interchange, scheme fees and acquirer markup. Bank transfers and open banking payments typically carry a flat or low per-transaction cost with no interchange or scheme layer, so they tend to look cheaper as ticket sizes rise.

The chart below shows the regulated interchange component only. It is not your all-in card cost, because scheme fees and acquirer markup sit on top and are not capped. It is useful as a floor: even before those additions, a consumer credit card carries more regulated interchange than a debit card, and cross-border cards can carry far more. Following the UK's departure from the EU, the PSR found that Visa and Mastercard raised interchange on UK-to-EEA card-not-present consumer transactions from 0.2 per cent to 1.15 per cent for debit and from 0.3 per cent to 1.5 per cent for credit, which the PSR estimates costs UK businesses an extra 150 to 200 million pounds a year.

The practical takeaway is that cards carry a percentage cost that grows with the amount, plus uncapped scheme fees, while account-to-account payments avoid those layers entirely. For low-value, high-frequency retail, card convenience often justifies the fee. For invoices, deposits and large one-off payments, a bank transfer or open banking payment can be markedly cheaper. You can see how Nasara handles both on the Pay product page.

Speed, settlement and cash flow

The rails differ sharply on when the money actually reaches you. An open banking or Faster Payments transfer moves near-instantly and settles into the recipient's account within seconds in normal conditions, running continuously including weekends and bank holidays. For a business watching its cash position, that immediacy is valuable.

Card payments feel instant to the customer at the till, but authorisation and settlement are separate steps. The funds are authorised at the point of sale, then settled and paid out to your account by your acquirer on a later cycle, often the next working day or a few days later depending on your agreement. So while the customer experience is fast, the cash landing in your account usually lags behind a direct transfer.

This has real consequences. If you rely on quick access to funds, for stock, payroll or supplier payments, account-to-account settlement can smooth cash flow. If predictable batched payouts suit your accounting better, card settlement cycles are not a problem, they are simply a different rhythm to plan around.

Disputes, chargebacks and fraud protection

This is where the two rails diverge most for risk. Card payments come with chargebacks: a customer can ask their card issuer to reverse a transaction, for example if goods never arrived or the payment was unauthorised. Chargebacks protect the customer, but they place the evidential burden and often the cost on the merchant, and they can be raised well after the sale.

Bank transfers are push payments. The payer authorises the money to leave their account, and there is no card-scheme chargeback mechanism to claw it back. That gives the business more certainty that a completed payment will stick, which is one reason account-to-account payments appeal for higher-value or final-sale transactions. The flip side is that the customer has fewer automatic remedies, so trust and clear terms matter more.

Fraud protection has shifted, though. Since 7 October 2024 the PSR's reimbursement requirement means victims of authorised push payment scams over Faster Payments must generally be reimbursed, up to a maximum of 85,000 pounds per claim, with the cost shared between the sending and receiving payment providers. The PSR says this level covers 99.8 per cent of scams by volume and 90 per cent by value. This narrows the old gap where push payments offered little recourse, and it is a reason the account-to-account rail is now more consumer-safe than it once was.

Card vs bank transfer at a glance

The table below summarises the practical trade-offs. Use it as a starting point, then weigh it against your average transaction value, your customers' habits and how much dispute risk you are comfortable carrying.

No single rail wins on every dimension. Cards win on familiarity and built-in dispute rights; bank transfers win on cost at higher values, settlement speed and payment finality. Most businesses end up offering both and steering customers toward the rail that suits each payment type.

Choosing a method by scenario

The right rail depends on the payment, not on picking one method for everything. Work through the payment types you handle and match each to the rail that minimises cost and friction while giving you acceptable protection.

As a rule of thumb, the higher the value and the more final the sale, the more a bank transfer or open banking payment earns its place. The lower the value and the more spontaneous the purchase, the more card convenience justifies its fee. Offering both lets you capture the sale either way, then steer each payment to the rail that fits it best.

Conclusion

Cards and bank transfers are not rivals so much as tools for different jobs. Cards give customers a familiar, protected way to pay and are hard to beat for low-value, in-person and impulse purchases, but they carry a percentage cost built from interchange, uncapped scheme fees and acquirer markup, and they expose you to chargebacks. Bank transfers and open banking payments strip out those layers, settle near-instantly and give you payment finality, which makes them well suited to invoices, deposits and larger sums, and recent PSR reimbursement rules have closed much of the old fraud-protection gap.

The strongest position for most UK businesses is to offer both and steer each payment to the rail that fits it, low-value convenience on cards, higher-value and final-sale certainty on transfers. Base the decision on verified costs and your own transaction mix rather than habit. If you would like to compare the all-in economics for your business, review our pricing and see how a single platform can run cards and account-to-account payments side by side.

Frequently asked questions