Payments Blog • 3 MIN READ

The rise of pay-by-bank and its effects on the payments industry

Jim Bowers

Written by Jim Bowers

In recent years, pay-by-bank has emerged as a popular payment method that offers a convenient and secure way for customers to make online purchases directly from their bank accounts.

As this payment method gains popularity, it is changing the way that financial institutions operate and impacting the broader payments landscape.

What is pay-by-bank?

Pay-by-bank is a payment method that allows customers to make online purchases directly from their bank accounts, without the need for a credit or debit card. It enables customers to use their online banking credentials to authorize a payment and transfer funds from their bank account to the merchant's account.

This payment method is offered by payment providers that partner with banks to facilitate the payment process.

Why is pay-by-bank becoming more popular?

There are several reasons why pay-by-bank is becoming more popular. First, it offers enhanced security, as customers do not need to provide their credit or debit card details to make a payment. This reduces the risk of fraud and helps to protect customer data.

Second, pay-by-bank offers faster payment processing times. Transactions are processed in real-time, which means that merchants can receive payment more quickly. This can help to improve cash flow for businesses and reduce the time and resources required for payment reconciliation.

Finally, pay-by-bank may be more convenient for customers who do not have a credit or debit card or who prefer not to use one for online transactions.

It also eliminates the need for customers to enter card details or other payment information for every purchase, making the checkout process faster and easier.

Impact on financial institutions

Pay-by-bank is changing the way that financial institutions operate and impacting the broader payments landscape in several ways:

1. Increased competition: As pay-by-bank becomes more popular, it is increasing competition among payment providers and financial institutions. Banks and other financial institutions are now competing with payment providers to offer the best pay by bank services to customers.

2. Changing revenue streams: Pay-by-bank is changing the revenue streams for financial institutions. As customers shift from card-based payments to pay-by-bank, financial institutions may see a decrease in revenue from card fees.

3. Opportunities for innovation: Pay-by-bank is also creating opportunities for innovation in the payments space. Financial institutions and payment providers are developing new services and features to enhance the pay by bank experience for customers.

4. Increased focus on security: With the rise of pay-by-bank, financial institutions are increasingly focused on security and fraud prevention. They are investing in new technologies and security measures to protect customer data and prevent fraud.

What’s next?

Keeping on top of emerging trends like pay-by-bank can be challenging. With IR Transact, you can simplify the complexity of managing your entire payments environment.

IR Transact helps capture the right data, that delivers deep real time visibility, making it easier to track performance of ecosystems, and turning that transaction data into actionable insights.

Discover more about what IR Transact can do for your business and contact us today.

Topics: Payments Performance management Transact Transaction analytics

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