J.P. Morgan rolls out pay-by-bank

Banking giant J.P. Morgan Chase went live with a pay-by-bank solution that leverages the ACH rails and open banking technology from Mastercard. Pay-by-bank is a relative newcomer to the payments scene. It lets merchants offer customers the ability to pay directly from their bank accounts, using either the ACH rails or an instant-payment network like RTP.

J.P.Morgan Chase has long been a major player in the ACH, serving both retail and corporate banking clients. Data released by Nacha shows the bank was the second largest originator and receiver of both ACH credits and debits in 2022. Wells Fargo & Co. beat out J.P. Morgan Chase as the top originator and Bank of America was ranked as the top receiver.

Chase is also both a major credit and debit card issuer, and a leading acquirer. In 2022, J.P. Morgan Chase processed 35.83 billion card payments on behalf of merchants, tying with Fiserv as the largest acquirer by transaction count.

Mastercard committed to open banking

Mastercard is heavily invested in open banking, which allows for the sharing of a consumer's financial information between their banks and authorized third parties by way of application programming interfaces. A key benefit for billers, especially those collecting recurring payments, is that open banking eliminates the need for billers to store and regularly update sensitive customer financial information.

Mastercard's open banking technology also incorporates "smart payment decisioning tools," which can be used to analyze the optimal time to initiate payments based on the bill payer's historical transaction behavior and risk patterns, thus reducing risks like returns due to NSF. Pay-by-bank uses the consumer's existing authentication protocols with their bank to retrieve necessary information to execute a payments, such as for rent, utilities, tuition, insurance and healthcare.

A few days after announcing its collaboration with Chase, Mastercard revealed it also is collaborating with Worldpay Merchant Solutions to support consumer bill payments as well as account owner verification through its open banking platform. The latter aims to help merchants with customer onboarding. Worldpay FIS processed 31.42 billion card payments in 2022. Mastercard also has a partnership with Zip to provide real-time underwriting for Zip's buy now pay later plans.

Verizon set to pilot

In a press release, Mastercard said telecom giant Verizon will be the first to pilot J.P. Morgan Chase's pay-by-bank offering in the coming months.

"This innovative payment option aligns with our commitment to providing our customers with convenient and secure payment choices," said Darrell Conn, executive director of Verizon. "We believe that pay-by-bank will enhance the overall customer experience, making it easier and more efficient for our customers to pay their bills."

Max Neukirchen, head of payments and commerce solutions at J.P. Morgan Chase, stated, "We are dedicated to enabling our clients to offer their customers a variety of payment options. Our partnership with Mastercard will allow for easy and secure payments directly from bank accounts." He added that the bank has a "robust pipeline of biller clients" that want to implement pay-by-bank.

Open banking leveraged to help consumers

Earlier this year, Mastercard added advanced analytics to its open banking services to help lenders better manage risk profiles. It also added risk models for small business loans and credit lines.

"Open banking solutions can speed up the lending process so consumers and SMEs [small and mid-sized companies] are able to get quick access to funds they need and get back to running their businesses and completing purchases," said Daniel Keyes, senior analyst at Javelin Strategy & Research. "It's particularly important that SMEs and consumers are only given funds that they're in position to pay back, and open banking can help make sure underwriters have access to the financial information needed so that neither ends up overextended."

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

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