Fed gauges consumer readiness for pay-by-bank at POS

A new report from the Federal Reserve Bank of Kansas City asks the question: Are U.S. consumers ready to use pay-by-bank at the point of sale? The answer: maybe, but not quite yet.

Pay-by-bank allows consumers to make payments by transferring funds directly from their bank accounts to the accounts merchants via an EFT network, such as the ACH, RTP or FedNow.

The appeal to consumers is greater clarity over their spending and potential improvements to budget control and cashflow management, the Fed found. For merchants, pay-by-bank offers a less expensive alternative to card acceptance.

"In the United States, pay-by-bank is gaining traction as a payment method for online transactions, especially online bill payments, but has yet to penetrate the physical points of sale," wrote Ying Lei Toh, senior economist in the economic research department at the Kansas City Fed, and author of the report.

Two common methods

The two most common methods for using pay-by-bank at the POS are "scan to pay," which uses QR codes, and "tap to pay," which uses NFC technology. Both methods require the use of a mobile device, which makes pay-by-bank a type of mobile payment.

Globally, scan to pay is the most common pay-by-bank method, likely because it costs less to deploy than does tap to pay. No specialized POS equipment is needed. On the other hand, tap to pay requires merchants to have NFC-capable terminals, which most U.S. merchant have. That's good, because most U.S. consumers value speed and convenience at the checkout, Toh noted.

The Fed's data bears this out. According to the Fed's 2025 Diary of Consumer Payment Choice, around 70 percent of all mobile payments in the United States were tap to pay, while only 5.2 percent were scan to pay.

Mobile payments users most poised to adopt

U.S. consumers who have adopted mobile banking or mobile payment apps are the most likely to use pay-by-bank at the POS when and where it is implemented. And many have.

The share of U.S. consumers who have adopted mobile banking and payment apps grew from 78.3 percent in 2025 to 85.8 percent this year. So, the indication is clear that U.S. consumers have the technological capability to use pay-by-bank at the POS, with the technological capability likely to continue in coming years, Toh wrote.

From 2021 to 2025, the share of U.S. consumers who made mobile payments at the point of sale more than doubled from 8.9 percent to 21.3 percent, and the share of POS transactions made using mobile devices nearly tripled, from 5.6 percent to 15 percent.

While the share of consumers using their mobile devices at the POS remains small, it would seem that the share who are familiar with pay-by-bank at the POS is small, too. But the numbers are trending up and likely will continue in that direction.

Some more likely than others

Some consumers are more ready to use pay-by-bank at the POS than are others. Younger, higher income and highly educated consumers are most likely to embrace this form of payment. Think in terms of college-educated millennials with incomes of $100,00 or more.

Baby boomers and older consumers tend to lack the know-how to make pay-by-bank payments at the POS. In 2025, just 9.6 percent of these consumers made mobile payments at the POS, and mobile payments made up just 5.7 percent of their POS payments, according to the Fed's data.

Consumers will need incentives

While having the technology and know-how to use pay-by-bank is important, whether consumers use this payment method—where and when it becomes available—may depend on their perceptions about it.

Today, consumers are more inclined to use credit and debit cards to make POS payments. According to the Fed's survey of consumer payment choices, these two methods accounted for 75 percent of all POS transactions and 88 percent of funding sources for POS payments in 2025.

Consumers in the United States receive strong buyer and fraud protections for card transactions, especially credit card transactions. And they typically receive rewards for paying with their cards.

"U.S. consumers may need to receive similarly strong protection and financial incentives to choose pay-by-bank over debit and credit cards at the POS," Toh concluded.

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