Not just another payment method – six reasons why leading PSPs are prioritising Pay by Bank
In the second article of this series, we focus on why leading Payment Service Providers (PSPs) – like Adyen and Stripe – are introducing Pay by Bank to their checkout options (and why this is important for their merchants too).
Leading Payment Service Providers (PSPs) are introducing Pay by Bank to their checkout options and this is important for their merchants too.
Pay by Bank offers several advantages to PSPs and their merchants, including potentially lower costs, fast payments, enhanced security, optimised conversion, expanded market reach, and flexibility.
The adoption of Pay by Bank represents a significant milestone in the evolution of online payments and its tipping point may be here sooner than you think.
If you missed it, catch up on our opening article in this series outlining the current status of Pay by Bank in 2024.
Many businesses today accept payments online through a PSP, and if you’re one of them, you might be familiar with the dizzying array of payment methods available. While PSPs often remain neutral about the payment methods they present, the momentum behind open banking-powered Pay by Bank is undeniable.
In fact, many of Europe’s leading PSPs have added Pay by Bank – sometimes called account-to-account payments (A2A) – to their repertoire. So why are PSPs adopting Pay by Bank, and why should a merchant selling goods and services via a PSP, care?
Several of the advantages of Pay by Bank for PSPs directly correlate into benefits for their merchants – let’s run through six of the most important ones…
1. Pay by Bank could offer lower costs
Since Pay by Bank only charges a small fixed fee per transaction, PSPs can use Pay by Bank as a low-cost payment method. By transferring money directly from account to account, Pay by Bank offers a different option at checkout. The result? A payment method that can potentially be more cost-effective for both PSPs and merchants.
2. Pay by Bank is fast
By removing intermediaries, Pay by Bank can enable instant payments (depending on the payment rails available)*. For PSPs, this means less time waiting for funds to settle. For merchants who need immediate payments, this means you can start sending or shipping out your goods straight away, with faster shipping times, and happier customers.
*When we say instant, we are typically referring to the fact that funds are transferred between accounts normally within a matter of seconds (vs. several days for traditional transfers). Some payments are made even-more-instantly when they are processed on “instant payment rails”, which have recently been mandated in the European Union by the Instant Payment Regulation (IPR).
3. Pay by Bank is secure
Pay by Bank mandates strong customer authentication (SCA) for transactions, ensuring heightened security. This modern approach to authentication uses biometric data like Face ID or fingerprints, which can reduce the risk of fraud. Additionally, the direct account-to-account nature of Pay by Bank minimises fraud vectors, enhancing overall security for merchants and their end-users.
4. Pay by Bank is optimised for conversion
Because SCA has been a requirement of open banking payments since it was first introduced in 2018, Pay by Bank was designed from the ground up to offer a secure, yet streamlined payment flow. Pay by Bank providers like Tink are continuously optimising the user experience by collaborating with banks to streamline processes, reduce steps, and offer a more seamless payment experience with enhanced conversion. PSPs who make Pay by Bank available via partnerships with third-party-providers like Tink are able to extend all of their conversion-improving enhancements to their merchants at scale.
5. Pay by Bank lets you reach more consumers
Payment methods are the lifeblood of PSPs. The more payment methods the better. However, many payment methods come with specific prerequisites, such as memberships or third-party registrations. Pay by Bank operates differently, requiring only a bank account—the most basic necessity in digital payments. This simplicity allows PSPs and their merchants to expand their market reach, serving anyone with a bank account.
6. Pay by Bank is flexible
Secure, low cost, and a good customer experience... the same could be said for lots of different payment methods. But what really differentiates Pay by Bank is its openness. As an API-first solution built on the principles of open banking, Pay by Bank was designed to encourage innovation and competition in the financial services space. Unlike many other payment methods which have strict requirements related to branding, implementation, and so on, PSPs – and merchants – can customise Pay by Bank with their own branding and tackle innovative use cases.
In summary
All payment methods offer unique benefits to merchants, consumers, and the PSPs that connect them. However, Pay by Bank stands out because it helps PSPs achieve their core business objectives – growing revenue and increasing profitability – while providing a high-performance, customisable payment method that they (and their merchants) can truly make their own.
The adoption of Pay by Bank represents a significant milestone in the evolution of online payments. We’ve written previously about how this payments technology is approaching its tipping point and that crucial moment may be here sooner than you think.
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Up next in this series, we’ll be paying special attention to the luxury retail industry and how Pay by Bank can help your business stay on brand. Keep an eye on our LinkedIn page to stay up to date.
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