How do online payments via bank transfer work?

In general, the process is quite simple. However, it may differ from country to country.


How do online payments via bank transfer work?

Bank transfers are simply the direct transfer of funds from a customer’s bank account into a business’ bank account. Unlike other payment methods covered in this guide, bank transfers do not have any specific setup requirements on the business’ behalf, to begin accepting payments from customers.

In general, the process is quite simple. However, it’s worth noting that the process may differ from country to country, and particularly so when the business’ bank and customer’s bank are located in different countries.

Diagram showing bank transfer payment process

  1. The customer completes the merchant’s checkout process and elects to pay via bank transfer.
  2. The business provides its bank account details to the customer, typically along with a unique transaction reference code.
  3. The customer instructs their bank to transfer the relevant amount to the business’ bank account, including the unique reference code to indicate the purpose of the transfer.
  4. The customer’s bank transfers the funds to the business’ bank.
  5. The business receives the funds into their account, noting the reference code.

(In situations where the customer’s bank is different from the merchant’s bank, financial institutions called ‘clearing houses’ are involved to facilitate the transfer of funds between the banks. If you’re interested in learning more about this process, Monzo has written an overview of what it looks like in the UK.)

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