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JPMorgan and Mastercard Pay-by-Bank Tool Goes Live

JPMorgan building

JPMorgan Chase says its Mastercard-powered pay-by-bank tool has officially gone live.

The offering, which combines Mastercard’s open banking technology and J.P. Morgan Payments’ ACH capabilities, lets merchants offer customers the ability to pay directly from their bank accounts, the companies said in a news release provided to PYMNTS Friday (Oct. 20).

“We are dedicated to enabling our clients to offer their customers a variety of payment options,” said Max Neukirchen, head of payments and commerce solutions at J.P. Morgan.

“Our partnership with Mastercard 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.”

The two companies first announced their partnership last year as a way to tap into growing consumer interest in alternative payment methods.

According to the release, the tool addresses a variety of biller pain points. For example, access to Mastercard’s Smart Payment Decisioning Tools lets them analyze the best time to initiate the payments based on the bill payer’s transaction behavior and risk patterns, ensuring payments get made and reducing the risks of returns due to insufficient funds.

“For consumers, pay-by-bank elevates the checkout experience, allowing billers to provide their customers with the option for a new, secure way to pay,” the release adds.

The tool uses the consumer’s authentication protocols with their bank to access the information needed to make a payment, letting them securely pay for things like rent, utilities, tuition, insurance and healthcare.

The release notes that Verizon will begin piloting the pay-by-bank tool in the months to come.

PYMNTS examined the rise of pay-by-bank earlier this month in a conversation with Link Money CEO Eric Shoykhet.

He argued that, for the moment, open banking will be “offering-driven,” because “consumers in a lot of cases don’t understand — or even know — about the solutions that either they’re looking for or that some of these things are possible.”

Ultimately, he added, “it’s going to be up to the key infrastructure providers and people in the value chain to push open banking-related use cases and products.”

As that report notes, pay-by-bank is increasingly being increasingly embraced in the U.S. Merchants are promoting pay-by-bank because they have a strong incentive to reduce their payment processing costs by as much as 70% or 80%, said Shoyet.

Consumers, meanwhile, are facing macroeconomic factors that drive them to open banking, with high interest rates on credit cards leading them to shift to debit transactions and pay-by-bank checkout offerings.