FIS and Banked Team to Widen Pay-by-Bank Usage

Financial technology firm FIS has formed a partnership with opening banking provider Banked.

The collaboration is aimed at driving new pay-by-bank offerings for consumers and businesses, according to a Wednesday (Feb. 14) press release.

“Pay-by-bank solutions simplify payments by combining the benefits of real-time payment rails with the flexibility and efficiency of open banking, where third-party financial service providers have direct access to banking data to complete digital payments,” the release said.

“As a result, businesses and consumers can make payments directly between business and consumer bank accounts without the need for card details, account numbers or sort codes.”

The companies argue that businesses can enjoy reduced fraud along with faster settlement and lower processing fees, while consumers get a smoother payment experience, easier verification and quicker access to funds.

Pay-by-bank payments, also known as account-to-account (A2A) payments, have been gaining traction, with 84% of users saying they are either very or extremely satisfied with their most-used A2A payment platform.

However, they have yet to fully disrupt the broader payments landscape, according to findings from “Tracking the Digital Payments Takeover: Consumer Familiarity Controls Account-to-Account Payment Growth,” a collaboration between PYMNTS Intelligence and AWS.

“A key factor contributing to the sluggish adoption is a significant knowledge gap among consumers,” PYMNTS wrote last month. “More than half of the respondents acknowledged abstaining from A2A options solely due to their lack of understanding.”

In addition, 24% of consumers were unaware that A2A payments were even possible, underlining the need for comprehensive awareness campaigns to inform consumers about the benefits of A2A payments.

And for bank-linked payments to succeed, they need to be as simple as swiping a card, Rahul Hampole, head of payments at Plaid, said in an interview here last week.

However, he cautioned that this type of payment isn’t suitable for every case. For example, there’s no real need for a consumer to walk into a retailer and pay by bank. But across other areas of commerce, there needs to be merchant adoption.

“Merchants should feel it’s very easy to slot this in as part of their checkout flows or other experiences that they’re building,” he said. Merchants may feel more at ease with card-not-present purchases — and, in particular, higher-value transactions — being tied to customers’ accounts.

“You see lower fees,” he said, “which from a merchant’s perspective reduces operational costs.”