U.S. partners accelerate pay-by-bank trend

A flurry of new partnership announcements indicates that pay-by-bank, a popular open banking solution currently offered in Europe, Asia and the Middle East, may finally be taking hold in the United States. These new collaborations will expand consumer payment choice, industry experts have noted, while facilitating simple, secure, frictionless bill payment experiences.

Open banking advocates claim that open banking benefits both merchants and consumers, citing the following examples:

• Elevated checkout experience: Consumers have a new, secure payment method that uses secure authentication protocols, such as biometrics, and can be securely used to pay rent, utilities, tuition, insurance, and healthcare. Because payments are direct debits, there are no additional fees or high interest charges.

• Advanced technologies: Merchants that offer pay-by-bank solutions on their checkout pages can leverage open banking technology and advanced decisioning engines to initiate payments at optimal times in accordance with bill payer histories. Historical transaction data can help firms evaluate customer behavior patterns and manage risk.

JPMorgan Payments and Mastercard

As The Green Sheet previously reported in breaking news on Nov. 1, 2023, JPMorgan's Payments launched its pay-by-bank solution, powered by Mastercard, which will be pilot tested by Verizon. The partnering firms noted that Pay-by-bank uses traditional ACH rails and gives merchants the ability to accept payments directly from customer bank accounts.

Max Neukirchen, head of payments and commerce solutions at J.P. Morgan, affirmed the partnership will allow for easy and secure payments directly from bank accounts. "We are excited for the future as we have a robust pipeline of biller clients across the U.S. interested to use our Pay-by-bank offering seeking to digitize their processes and increase payments efficiency," he said in a statement.

Chiro Aikat, executive vice president, U.S. market development at Mastercard, noted that open banking meets the needs of digital-first consumers who want choice, value and control over their finances, especially for everyday expenses like monthly bills.

"Our partnership with J.P. Morgan Payments helps meet this critical need, providing billers and merchants with a payments experience that is simple, seamless, and secure for their customers," he said.

Link Money and Bold Commerce

Additional collaborations between Link Financial Technologies, doing business as Link Money, and Bold Commerce, will enable U.S. enterprises to offer pay-by-bank on ecommerce sites, further reducing payment card fees while mitigating fraud and churn, according to the partnering companies.

Shaun Vanderkaap, vice president, strategy at Link Money, stated that Bold Commerce will be one of the early adopters of the open banking solution. "As merchants continue to face increasing competition, Bold Commerce users will be able to reduce their payment costs by as much as 70 percent," he said in a statement.

Peter Karpas, CEO at Bold Commerce, agreed, stating that the Link Money and Bold Commerce solution enhances checkouts by bringing the ease and security of direct, account-to-account payments.

"Every shopper has their preferred payment method among the wide range of options available to them—from Buy Now, Pay Later to digital wallets, credit cards, and account-to-account payments—and they won't hesitate to leave a product behind if their preferred method isn't available," he said in a statement, noting that offering Link Money's Pay by Bank at checkout has further diversified payment choices and personalized the shopping journey for customers.

More in 2024

Jacob Morgan, principal analyst at Forrester Research, expects open banking to continue to scale in the United States. His Nov. 1, 2023, blog post, "Predictions 2024: The Winners Will Be Those Who Weave Value Around Payments," positioned 2024 as the year for account-to-account payments.

"In Europe, PSD2 payment innovation is bearing fruit, and in 2024, payment initiation adoption will more than double, spurred on by the EU's instant payments proposal," he wrote. "By late 2024, hundreds more banks and payments services providers will launch account-to-account (A2A) faster payments capability built on the recently launched FedNow."

A downloadable copy of Forrester's 2024 predictions guide, which includes open banking and other trending topics, is available at www.forrester.com/predictions/#form

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