Pay-by-bank gets real

Sionic, an Atlanta-based financial technology company, launched its instant bank pay and fraud detection services in Microsoft Marketplace. Merchants can now download the apps and consumers can pay those participating merchants from mobile wallets connected to their checking accounts.

Sionic's pay-by-bank is a closed-loop system that uses the RTP and FedNow rails to move payments from consumer to merchant checking accounts at participating financial institutions in a matter of seconds. And it does this at a deep discount over credit and debit card interchange, explained Ron Herman, Sionic's founder and CEO.

The cost to the average small business to accept payments is 1 percent of the ticket total; big-ticket businesses, like automobile dealerships and title companies, will be assessed a flat fee of $25, Herman said.

"Organizations like Sionic are helping advance U.S. payments with solutions that foster innovation while expanding the value and reach of the FedNow Service," said Nick Stanescu, executive vice president and chief FedNow executive. "As the ecosystem continues to grow and evolve, we move toward our long-term goal of delivering reliable, efficient and widely accessible instant payments for all."

One early adopter is a grocery retailer with more than 400 stores and an online presence that is projecting savings of $9 million within the first 12 months of using pay-by-bank. The savings come not just from interchange, but from fraud detection and dispute resolution as well.

Sionic also is working with a tech-savvy bank in the Northeast that has relationships with financing companies serving 300-plus auto dealerships that are eager to receive pay-by-bank transactions, Herman noted. He is optimistic that other, larger banks will follow the lead of this community bank.

Years in the making

Herman said he has been working toward a solution like this for 16 years, having set out in the early 2010s to build the future of low-cost payments in America. "Today that future is here," he said.

Sionic embarked on a pay-by-bank proof of concept in 2024, only to discover components crucial to commerce transactions missing from both RTP and FedNow, he noted. For example, there was no alias directory as is the case with Zele. There also were no fraud protections for POS transactions and no support for payment disputes.

Sionic uses Microsoft Foundry (which Herman described as a "one-stop shop for AI") to handle fraud detection and disputes. For example, a customer requesting a refund triggers an AI agent to negotiate with an agent representing the seller, removing the financial institution from what is normally a tedious and time-consuming process. FIs are called upon only when escalation is required.

"We're pleased to welcome Sionic to Microsoft Marketplace," said Cyril Bilikoff, vice president, Microsoft Azure Product Marketing. "Marketplace connects trusted solutions from global partners with customers worldwide, making it easy to find and deploy apps that work seamlessly with Microsoft products."

Making it more like card transactions

One aspect of the Sionic service that differs from other pay-by-bank initiatives is the ability for merchants to tailor rewards to individual consumers. The use of AI solutions to support dispute resolution and fraud protections also is likely to be a key selling point for merchants, as well as consumers and financial institutions, Herman reiterated.

A report released on July 15, 2026, by Federal Reserve Bank of Kansas City, Are U.S. Consumers Ready to Use Pay-by-Bank at the Point of Sale?, revealed that while the technological know-how exists for pay-by-bank (namely familiarity with mobile wallets and fast payment rails), consumers receive strong fraud protections and rewards for paying with 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," Ying Lei Toh, senior economist in the economics research department at the Kansas City Fed and the report author wrote.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.