Bank transfers: bank debits, credit transfers and bank redirect

A. Hembar-Tabakova

Business Development Manager

24 February 2025

Bank transfers: bank debits, credit transfers and bank redirect

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The global payments landscape is evolving rapidly, driven by increasing digitalization and the growing demand for seamless cross-border transactions. To effectively serve an international customer base, businesses must offer payment methods that align with local consumer preferences and regulatory frameworks. However, payment infrastructures vary across countries—differing in clearing times, liability rules, and consumer authorization requirements.

Among these methods, bank transfers play a significant role, often intersecting with the concept of bank redirects. But what defines them as payment methods? Are they distinct payment solutions, or do they simply mechanisms? Understanding their nature and role in the broader payment ecosystem is crucial for businesses navigating international transactions.

Bank transfer: bank debits and credit transfers

Bank transfers are a fundamental part of modern financial transactions, enabling the seamless movement of funds between accounts. However, not all bank transfers operate in the same way. They can generally be categorized into two distinct types: bank debits and credit transfers. While both serve the purpose of transferring money, they differ significantly in terms of initiation, control, and common use cases.

A bank debit is a transaction initiated by the recipient (payee), allowing them to withdraw funds from the payer’s account—typically with prior authorization, such as a direct debit mandate. This method is commonly used for recurring payments like utility bills, subscriptions, or loan repayments. Examples include SEPA Direct Debit (Europe), ACH Debit (USA), and Bacs Direct Debit (UK). Bank debits provide businesses with a reliable way to collect payments automatically, reducing the risk of late or missed payments. They are particularly effective for businesses with subscription-based revenue models, such as streaming services, software-as-a-service (SaaS) providers, and insurance companies.

In contrast, a credit transfer is initiated by the payer, who actively sends funds to a recipient’s account. This method grants full control over the transaction to the payer, making it ideal for one-time payments, salary deposits, or peer-to-peer transfers. Examples include SEPA Credit Transfer, SWIFT, CHAPS (UK), Faster Payments (UK), and Fedwire (USA). Credit transfers are often used in business-to-business (B2B) transactions, supplier payments, and government disbursements.

At their core, the key distinction lies in who initiates the transaction:

Bank debits: The recipient pulls funds from the payer’s account.
Credit transfers: The payer pushes funds to the recipient’s account.

Both methods play a crucial role in financial systems worldwide, with their applicability depending on the payment scenario and the level of control required by the payer or recipient. Understanding these differences helps businesses and individuals choose the right method for their financial needs.

Bank redirect

A bank redirect is a payment method where a customer is temporarily redirected from a merchant’s website or app to their online banking platform to authorize a transaction. Once the payment is approved, the customer is seamlessly returned to the merchant’s site with confirmation of the successful transaction.

This method has several key advantages:

Real-time authorization – The customer logs into their bank account and approves the payment instantly.
No card details required – Payments are authorized through online banking credentials rather than card details.
Enhanced security – Since transactions occur directly through the bank, fraud risks are significantly reduced.
Instant confirmation – Merchants receive immediate confirmation, enabling quicker order processing.
Lower transaction costs – Unlike card payments, which involve interchange fees, bank redirects often have lower processing fees.

Common Use Cases for Bank Redirects

E-commerce purchases – Providing an alternative to card payments for online shoppers.
Bill payments – Allowing customers to pay utility or service provider invoices directly from their bank accounts.
Peer-to-peer (P2P) transfers – Enabling secure money transfers without sharing card details.
Government payments – Some tax authorities and public service institutions enable payments via bank redirects.
Corporate payments – Businesses use bank redirects to facilitate large B2B transactions securely.

For example, when a customer selects “Pay with Bank” at checkout, they are redirected to their bank’s login page. After signing in and approving the payment, they are automatically returned to the merchant’s site with confirmation of the successful transaction.

Examples of Bank Redirect Systems

Several popular bank redirect systems exist worldwide, making online payments more secure and efficient:

iDEAL (Netherlands) – A widely used payment method for online purchases, covering over 60% of e-commerce transactions in the Netherlands.
Sofort (Germany, Austria, Belgium, Switzerland) – A trusted bank redirect solution in Europe, often used for travel and retail transactions.
Przelewy24 (Poland) – Popular among Polish consumers, supporting over 350 banks.
Bancontact (Belgium) – A dominant method for online banking payments, widely accepted by Belgian retailers.
Trustly (Europe, UK, USA) – Enables bank payments without needing an intermediary account.
Giropay (Germany) – A standard for online banking transactions in Germany, used by millions of consumers.

Bank redirects are often used to facilitate credit transfers, where the payer actively initiates the transaction from their bank account. Unlike bank debits, which are initiated by the recipient (e.g., a company withdrawing funds with prior authorization), bank redirects give full control to the payer, ensuring that funds are only transferred after explicit approval. This makes them a preferred option for businesses and consumers seeking a secure, efficient, and user-friendly payment solution.

Credit Transfers – Bank Redirects: How They Work Together

As previously discussed, credit transfers are payer-initiated transactions where funds are pushed from the payer’s account to the recipient’s. Bank redirects serve as a secure authorization mechanism for these transfers, particularly in online payments.

Here’s how they work together:

Payment Initiation: The payer selects a “Pay via Bank” option on a merchant’s website or app, triggering a bank redirect.

Redirection & Authentication: The payer is securely redirected to their bank’s platform, where they log in and authorize the payment.

Real-Time Fund Transfer: Upon approval, the bank processes the credit transfer, moving funds from the payer’s account to the recipient’s.

Instant Confirmation: The payer is redirected back to the merchant’s site, and the merchant receives immediate payment confirmation.

Example Scenario

You’re shopping online and choose to “Pay with Bank” at checkout.
You’re redirected to your bank’s login page, where you authorize the payment.
Funds are transferred from your account to the merchant’s account via a credit transfer.
You’re redirected back to the merchant’s site with a payment confirmation.

This process enhances security, as the transaction happens directly within the payer’s bank, reducing fraud risks. It also ensures efficiency, as payments are processed in real time, providing instant confirmation to both parties.

Unlike bank debits, where the recipient pulls funds with prior authorization, credit transfers via bank redirects give full control to the payer, making them a preferred method for secure and user-friendly transactions.

A Payment Method or a Facilitation Mechanism

The relationship between bank redirects and payment methods like credit transfers can be a bit nuanced, so let’s break it down to clarify whether bank redirects should be understood as a payment method or as a facilitation mechanism for payment methods like credit transfers.

1. Bank Redirects as a Facilitation Mechanism

In most cases, bank redirects are not a payment method themselves but rather a process or mechanism that enables certain payment methods (like credit transfers) to work securely and efficiently. Here’s why:

Function: Bank redirects temporarily send the payer to their bank’s platform to authorize a payment. Once authorized, the actual payment method (e.g., credit transfer) is executed.
Role: They act as a bridge between the payer, the merchant, and the bank, ensuring secure authorization and real-time processing.
Example: When you select “Pay with Bank” on an e-commerce site, the redirect process facilitates a credit transfer from your account to the merchant’s account.

In this sense, bank redirects are more of a technical process that supports payment methods rather than being a standalone payment method.

2. Bank Redirects as a Payment Method

However, in some contexts, bank redirects are categorized as a payment method, especially in the context of open banking and instant payment systems. Here’s why:

User Experience: From the payer’s perspective, selecting “Pay with Bank” feels like choosing a distinct payment method, even though the underlying process involves a credit transfer.
Branding: Some payment systems or platforms market bank redirects as a separate payment method for simplicity (e.g., “Bank Pay” or “Instant Bank Transfer”).
Regulatory Frameworks: In regions with open banking regulations (e.g., Europe’s PSD2), bank redirects are often treated as a distinct payment initiation service.

In these cases, bank redirects are presented as a payment method to users, even though they technically facilitate credit transfers.

Should We Understand Bank Redirects as Payment Methods?

It depends on the context:

From a Technical Perspective:

Bank redirects are better understood as a facilitation mechanism for payment methods like credit transfers. They enable secure authorization and real-time processing but are not a payment method themselves.

From a User or Merchant Perspective:

Bank redirects can be treated as a payment method because they provide a distinct way for users to pay (e.g., “Pay with Bank”) and offer a seamless experience.

From a Regulatory or Industry Perspective:

In open banking or instant payment systems, bank redirects are often classified as a payment initiation service, which can be considered a type of payment method.

In a practical example, from the technical view a bank redirect facilitates a credit transfer by allowing the payer to authorize the payment through their bank. From the user’s point of view, the payer selects “Pay with Bank” and perceives it as a payment method, even though the underlying process is a credit transfer.

The Future of Bank Redirects in the Payment Ecosystem

As financial technology continues to evolve, bank redirects will likely play an even more significant role in digital payments, offering a secure, cost-effective, and user-friendly alternative to traditional card-based transactions. With the rise of Open Banking and PSD2 regulations in Europe, we can expect further innovations in bank redirect services, enhancing their speed, accessibility, and global reach. Businesses that integrate these solutions will gain a competitive advantage by offering customers more flexible and secure payment options, ultimately driving higher conversion rates and reducing payment processing costs.

Conclusion:

In conclusion, while bank redirects themselves are not inherently a standalone payment method, they play a crucial role in facilitating secure and efficient payments, particularly for credit transfers. They act as an intermediary, guiding the payer through their bank’s platform to authorize payments, which ensures both security and real-time processing. In certain contexts, such as open banking and instant payment systems, bank redirects may be treated as a distinct payment method, offering a seamless and user-friendly experience.

Ultimately, understanding bank redirects depends on the perspective and context in which they are viewed—whether from a technical, user, or regulatory standpoint. From a technical view, they function as a mechanism that supports payment methods, while for users and merchants, they can be perceived as a separate payment option. As payment systems continue to evolve, the role of bank redirects will remain pivotal in shaping how transactions are securely processed and experienced by consumers.