What is Pay by Bank and why it will give your business an advantage

Pay by Bank is part of the next generation of payment methods that provide consumers security and transparency while maintaining a phenomenal user experience. 

Shoppers pay for goods or services directly from their bank account rather than charging a debit or credit card. They log in with their unique bank credentials, replacing manual card entry.

Payments made with Pay by Bank are deducted directly from shoppers' accounts. Once they select the payment method, they're redirected to their banking app, where they complete the payment. Shoppers are verified and authenticated in real time to minimize fraud.

The payment experience is user-friendly, secure, and cost-effective. These benefits are clear for consumers. 84% of consumers in the US are paying bills directly from their bank accounts. 1 out of 2 people have already linked their bank accounts to make a payment. And 67% have signed up for a 1% discount. 

The most popular use cases for Pay by Bank are recurring payments, such as utility bill payments and subscriptions. For one-off payments, the travel and e-commerce industry is especially well suited for Pay by Bank transactions due to a high average transaction value (ATV).

Pay by Bank has many benefits for consumers and companies. The payment method can help businesses lower payment fees, reach new audiences, and improve convenience and conversion.

Lower payment cost

The majority of payment-related costs are interchange and scheme fees. Pay by Bank removes these fees entirely. Compared to credit cards, businesses can save up to 85% on the total cost of payment with Pay by Bank, making the payment method especially interesting for purchases with a high ATV. 

Because of the strong security and real-time authentication, Pay by Bank also reduces dispute and chargeback fees. 

Improve conversion and approval rates

Pay by Bank lets customers log in with their bank credentials and pay immediately. In the US, it increases conversion considerably by addressing performance issues commonly seen with ACH direct debit transactions.

Enterprise businesses can increase authorization rates by verifying consumer data and doing a balance check at the time of payment with optimal security. 

Pay by Bank also reduces involuntary subscription churn by bypassing card expirations. Americans have the same bank account for 17 years on average, compared to the 2-3 years for cards.

Reach a different audience

Younger generations are wary of credit cards and are fast to embrace Pay by Bank. They already use the Pay by Bank flow when paying with Venmo or directly with their bank accounts for things like taxes. 

They aren’t the only demographic that’s open to alternative ways to pay. Most consumers are already using Pay by Bank for peer-to-peer payments. Three out of four consumers selected Pay by Bank as a payment method when incentivized with as little as 1% savings. 

Pay by Bank removes the need for manual card entry and has fast verification, leading to increased security and convenience, both being major consumer concerns.

Pay by Bank has many benefits for businesses and consumers. But how does it actually work? 

Pay by Bank for consumers

To use the payment method, shoppers need to sign up with a Pay by Bank provider like Plaid, which takes less than a minute. According to Plaid, 1 in 2 consumers have linked their bank accounts and are ready to use Pay by Bank.

Once the sign up with a Pay by Bank provider is complete, the shopper is ready to enter a straightforward payment flow.

1. Shopper selects their preferred payment method

2. Shopper sees the account they’ve stored and proceeds to pay

3. The account gets verified in real time

4. Payment is successful

Pay by Bank for businesses

Pay by Bank has more benefits for businesses than cost reduction and increased conversion and authorization. It will help diversify their payment method mix and offer a simple, secure, and transparent way to check out online.

Offering Pay by Bank also increases trust at the checkout as consumers are familiar with the payment flow and shopping experience. This strengthens loyalty and lowers cart abandonment.

What’s more, bank accounts don’t expire like cards. This reduces involuntary churn for recurring payments, leading to high customer retention for subscription businesses.

Pay by Bank has already become the payment method of choice worldwide. The value of open banking payments is forecasted to quadruple over the next four years, particularly in Europe, Brazil, and the US.

The speed at which consumers in the US are embracing Pay by Bank shows the potential of the payment method. Consumers will always prioritize convenience and security. Pay by Bank is a digital and mobile-first option, with the latest authentication methods.

Thanks to our global expertise, we can help you add diversity to your checkout and keep a competitive edge in the US and elsewhere.

Are you curious to learn more about Pay by Bank in the US and what it can do for your business? Get in touch today.