Pay by Bank in 2024 - the current status and outlook
Sometimes called open banking payments, or account-to-account (A2A) payments, Pay by Bank is now the more common industry term in ecommerce. Tink is one of the leading providers of Pay by Bank, and here we provide an overview of one of the fast-growing payments technologies in the first of a new blog series.
Pay by Bank is an account-to-account payment method allowing quick and secure money transfers directly between bank accounts, gaining traction in ecommerce for its low costs and robust security.
Payment service providers (PSPs) like Adyen and Stripe are adopting Pay by Bank to broaden their user base, reduce fraud, and offer customisable payment flows, potentially enhancing revenue and profitability.
Pay by Bank can streamline consumer transactions and prevent merchant losses, as illustrated by scenarios involving quick mobile payments and possibly avoiding chargebacks.
In the fast-moving world of digital commerce, the quest for reliable, secure, and user-friendly payment methods is relentless. If you’re an ecommerce business or payment service provider (PSP), you're likely familiar with this pursuit. As a merchant, you might be experiencing payment method fatigue trying to stay on top of the variety of payment methods on offer and may find it hard to determine which payment methods are worth the integration.
Continue reading to learn:
What exactly is Pay by Bank and how does it work?
Why are PSPs like Adyen and Stripe adopting Pay by Bank?
How do consumers and merchants benefit from Pay by Bank?
Remind me, what is Pay by Bank?
Pay by Bank is the now commonly used term for the account-to-account payment method that allows consumers to quickly transfer money directly from one bank account to another – whether that be to a business, another consumer, or between their own personal accounts. Pay by Bank combines a modern, seamless user experience with industry-leading security and low costs.
To show how it might look, here’s an example flow where a consumer simply selects Pay by Bank in the checkout and then authenticates the transaction using their bank app’s secure biometric recognition (e.g. Face ID or a fingerprint). Once authenticated, the money moves from their account to the receiving account in seconds.
An example Pay by Bank flow
Clicking to pay by bank immediately starts the Tink flow
Why is Pay by Bank gaining traction in the payments industry?
Many checkouts that consumers use these days are enabled by PSPs, two of the more well-known ones being Adyen and Stripe. These PSPs mostly go unnoticed to the consumer checking out, but for the businesses using them, they can provide vital infrastructure to allow their customers to check out in a smooth manner.
At their core, PSPs aim to enable merchants to process payments from the widest possible customer base, ensure transaction security, and simplify payment processing. But to thrive in the competitive payments industry, PSPs must also achieve more fundamental goals such as growing revenue and increasing profitability. While many payment methods can help PSPs meet the first goal, not all can deliver on the second.
That's where Pay by Bank shines. It not only broadens their total base of end-users, but can also help them and their merchants:
With a cost-effective payment method
Reduce fraud and losses
Innovate with customisable payments flows
We’re just scratching the surface here, and in our next article in this series we go into more detail on how Pay by Bank is uniquely positioned to be an optimal payment method for PSPs.
Why are consumers choosing Pay by Bank?
Let’s take an everyday situation and show how Pay by Bank makes life easier for consumers…
While you're on your commute to work you read an email with a promotion for a holiday package. You and your partner have been saving up for a special trip in a dedicated holiday account and if you book and pay for the holiday quickly you can get a discount. However, when you get to the checkout you realise you don't have the card for that account with you. Ultimately, you have to wait until you return home later that evening to complete the checkout and, unfortunately, by then the offer is no longer available.
In this scenario, having a Pay by Bank option at the checkout could have made it possible for you to check out quickly and securely on your mobile device, directly from your bank account without needing to wait to return home. As well as reducing the need for manual data entry, Pay by Bank can also reduce fees paid by consumers and provide fast refunds.
These capabilities are why we’re confident that Pay by Bank adoption will continue to grow – read more about this topic in our recent interview with Product Solutions Director, Livia Kathi.
How about businesses, why should they adopt Pay by Bank?
This time, let’s take a possible scenario that a merchant could face…
You’ve found a committed buyer for one of your products, great news. After the transaction appears to go through and you’ve paid fees on it, you ship out the item to the customer’s address. Happy ending, right? Well, unfortunately, a few days later, you get hit with an unjustified chargeback from the customer’s bank, saying that payment wasn’t authorised and that you’ve lost out on the item.
With Pay by Bank, payments settle quickly, meaning you have an added level of confidence (and the funds) to start processing and shipping orders immediately. And since Pay by Bank flows are authenticated by the end-user, chargebacks could potentially be eliminated.
This is a simple example, but one which shows how merchants can avoid losing out to failed transactions.
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So that’s a quick overview of where Pay by Bank – with its numerous benefits for consumers and merchants – is at today. With its modern, seamless user experience, robust security, and low costs, it's no wonder that Pay by Bank is gaining traction.
Stay tuned for the next article in this series by following us on LinkedIn, where we post all of our new content and much more.
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