What is Pay by Bank and what can I use it for?

From the major card networks, to Payment Service Providers, to banks and merchants, account-to-account (A2A) payments (or ‘Pay by Bank’) are causing a shake-up in the world of payments. 

In essence, Pay by Bank is transforming how consumers pay online and in person, bringing greater choice, fairness and competition to the payments market. Pay by Bank simplifies the payment journey through real-time networks (in Australia - the PayTo network; in the UK - Faster Payment System, Clearing House Automated Payment System; in the US, FedNow, Real-Time Payments, ACH), which reduces complexities, cuts card scheme fees, increases security, lowers fraud risk, and enhances conversion. 

However, the specific uses and benefits of Pay by Bank are still not widely understood, so let’s take a closer look at some of the ways Pay by Bank will be used across the world in the coming years.

eCommerce payments

Pay by Bank can be used by any eCommerce merchant as an alternative to debit cards. Consumers pay for goods and services directly from their bank, without the need for a card or passwords. Funds are settled instantly and with increased security such as multi-factor and biometric authentication. Pay by Bank allows these businesses to quickly recover from failed card-not-present (CNP) transactions and issue instant refunds. In areas like homewares, travel and electronics, consumers also stand to gain significantly by avoiding additional fees applied as a percentage to high value purchases.

Bill Payments

Whether direct debit or one-off bill payments, Pay by Bank is a great alternative for bill payments. Back office efficiencies reduce business costs and simplify reporting and accounting. It also improves cashflow with instant receipting, and quickly identifies any expired payment instruments. On the customer side, it’s much simpler than current bill pay methods that still require direct debit paperwork or entering of reference numbers on internet banking. It is also far easier to switch accounts if a person’s banking situation changes. From mortgages, to utility bills, to taxes or streaming subscriptions, Pay by Bank can literally make paying a bill a one-click job.

In-person payments

Pay by Bank can be used at the checkout in place of a debit or credit card, for social peer-to-peer transactions, and other uses like pay-at-table. The lack of card means much lower merchant fees and no surcharge to the consumer in geographies where this still applies. It also provides a superior one-click UX, minimises fraud through multi-factor authentication, and can be used cleverly as an incentivisation tool through simple integrations with rewards apps and loyalty programs.

Collections

Pay by Bank can ease the load of collections like credit card repayments, car lease instalments or annual insurance premiums. Payment links facilitate faster repayments, while automated reconciliation improves back-end efficiencies.

Account top-ups

Pay by Bank is a great option for account top-up requirements like investment platforms. The simpler UX encourages usage, particularly the ability to provide in-context top-ups without leaving the site. Lower payment costs are crucial for these merchants that rely on a top-up model.

Payouts

Payouts like insurance claims, AirBnB hosts and gig workers can be complex, involving numerous processing fees and compliance. Pay by Bank’s payee validation lowers compliance risk and reduces costs like processing fees. Payees also receive the funds immediately which improves UX and lowers risk.

Pay by Bank is bringing payments out of the dark ages and creating a globally accessible network that is good for everybody. Those merchants that move on it now stand will future-proof their business through cost, customer experience, loyalty and security.