In a recent tweet, Martin Lewis, the founder of Money Saving Expert, raised an important caution regarding the emerging “pay by bank app” options available at online checkouts. He noted that while these methods are designed to streamline the payment process, offering a quicker and easier way to complete transactions, they come with significant drawbacks in terms of consumer protection.
Lewis pointed out that this payment method is increasingly seen on platforms like JustEat and Ryanair. The process is straightforward: users select their bank, log in via biometric authentication, and the transaction is completed without the need to input card details. However, this convenience masks a critical issue—these transactions essentially function as bank transfers, which do not afford the same level of protection as credit card payments.
When using a credit card, consumers benefit from protections such as chargeback rights and the provisions of Section 75 of the Consumer Credit Act, which can be invaluable if a transaction goes awry. In contrast, opting for a bank app means relinquishing these rights, making it imperative for consumers to exercise caution, especially with larger purchases.
What is Section 75?
Section 75 provides essential protections for consumers using certain non-cash payment methods. Specifically, it allows individuals who pay with a credit card to claim refunds for faulty goods or services. Additionally, the chargeback scheme enables cardholders to request their bank to reverse a transaction under specific circumstances, offering an extra layer of security.
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Other payment platforms, such as PayPal, also offer certain protections for consumers, safeguarding them against potential issues that may arise during a purchase. A recent survey conducted by KPMG UK revealed that over two-thirds of respondents who faced problems with card and phone payments in the past six months have become more inclined to carry cash. The survey further indicated that 22% of participants had experienced such payment issues, reinforcing the notion that traditional cash may still hold value in an increasingly digital world.
