Pay by bank allows shoppers to transfer funds directly from their bank accounts but consumer expert warns the method removes key protections like Section 75 and chargeback rights
A consumer expert has sounded an alert about a new Amazon payment option. Pay by bank is a fresh method to purchase products online without entering any card information.
This week Amazon became the latest major retailer to introduce the payment option for customers to use when buying products or setting up Prime subscriptions. Pay by bank enables customers to transfer money directly from their bank accounts to retailers, without needing to enter any credit or debit card information.
Along with Amazon, the option is available at several well-known brands, including Ryanair and Just Eat. For shoppers, the new payment option provides speed and convenience, with no requirement for a physical card to complete a purchase.
Merchants also gain from lower transaction fees. Despite its increasing popularity, consumer rights champion Scott Dixon told Sky Money about worries over the protections shoppers sacrifice when they choose to pay in this manner.
He states it eliminates or diminishes crucial consumer protections – Section 75 and chargeback – two of the most robust refund routes available to shoppers. This means that if the retailer goes bust, refuses to refund you or delivers faulty goods, you are essentially left stranded.
His advise has been echoed by consumer group Which? which said businesses find it useful because Ithey can avoid card transaction fees and also benefit from receiving customer funds immediately. It said for consumers there are benefits too – as refunds can be processed instantly, and most crucially, card details aren’t shared when making a transaction – eliminating the risk of them being stolen or compromised.
It said gthat while all purchases are covered under the Consumer Rights Act,meaning any goods you buy must be fit for purpose, as described and of satisfactory quality, ‘these protections are not always easy to enforce’. Which? said: “In the event an item arrived damaged or not as expected a retailer should refund you under the Consumer Rights Act – but if they refuse your only recourse would be filing a claim in the small claims court, which can be an expensive and time consuming process.
“In contrast, a shopper using a credit card for these purchases would benefit from Section 75 protection, so long as the transaction was for more than £100 and less than £30,000. Under Section 75, a credit card company is jointly and severally liable for the purchase, meaning they would have to refund you if you couldn’t recoup your costs from the retailer. Likewise, those using a debit card or a credit card for purchases of any value would have protections via the voluntary chargeback scheme. “
Jenny Ross, Which? Money Editor, said: “Innovations like Pay by Bank present opportunities for businesses and consumers alike, but they’re not without risk, particularly as they lack the rigorous purchase protections you get when paying by card.
“We’re calling on the regulator to act to ensure consumers can use Pay by Bank with confidence, but in the meantime, we’d urge consumers to think carefully before using it to book events or make substantial purchases – for now, your good old-fashioned credit or debit card may be the best option.”
Mr Dixon advised steering clear of bank transfers, particularly for big-ticket purchases such as holidays, electronics, cars and sofas, advance bookings like concert tickets or hotel reservations, and when dealing with an unfamiliar seller. For purchases exceeding £100, he says the strongest protection comes from paying at least the deposit on a credit card.
For anything under £100, you should aim to pay with a debit card to benefit from chargeback protection, which covers you for up to 120 days from the purchase date, he added.
Amazon has been contacted for comment.
