Retailers seeking to reduce payment processing fees and improve customer retention are looking at pay-by-bank technology as a viable alternative to traditional card payments. This method, which allows consumers to pay directly from their bank accounts, is particularly appealing to younger generations like Millennials and Gen Z, who prioritize seamless and secure payment experiences. The shift towards digital-first solutions has prompted merchants to explore options that enhance transaction efficiency while lowering operational expenses.
Earlier discussions around alternative payment methods primarily focused on mobile wallets and buy now, pay later (BNPL) solutions. While these methods gained popularity, they still carry processing fees that merchants must absorb. Pay by bank, on the other hand, operates through Automated Clearing House (ACH) rails, significantly reducing transaction costs. This cost advantage is now drawing increasing attention as businesses aim to optimize profitability while offering a familiar and convenient payment experience for customers.
Why Are Merchants Turning to Pay by Bank?
Merchants adopting pay by bank can see substantial cost savings, with transaction fees potentially slashed by up to 50% compared to debit card transactions. This reduction allows businesses to reinvest in customer loyalty programs, driving higher transaction values and repeat purchases. The payment process itself is straightforward, requiring consumers to log into their bank accounts without the need for entering card details, reducing friction at checkout.
Christina Potter, head of eCommerce at Trustly, highlighted the growing interest in this payment method among businesses looking for lower-cost alternatives.
“What we’re seeing — and I think what everyone’s seeing — is more interest around pay by bank as a way to accept payments,”
she stated. She further explained that the method offers more than just cost savings, as it also enhances customer convenience.
How Does Pay by Bank Appeal to Younger Consumers?
Younger demographics, particularly Gen Z and Millennials, are more willing to try new payment solutions, making them key adopters of pay-by-bank technology. These digital-first consumers appreciate a streamlined payment experience that eliminates concerns about card expiration or potential fraud. Vivian Chang, vice president of eCommerce at GNC, emphasized the importance of user experience in encouraging adoption.
“If you get consumer experience right, then it naturally opens up the path to both acquire and retain [customers],”
she said. Studies suggest that offering incentives can further boost adoption rates, with some research indicating an increase from 47% to 81% when rewards are included. This data underscores the potential for businesses to drive engagement through targeted promotions.
Security and operational efficiencies also contribute to pay by bank’s appeal. Because transactions are authenticated through banking credentials, risks associated with lost or stolen cards are minimized. Additionally, merchants can store payment details securely, eliminating the need for customers to repeatedly enter their information.
For businesses considering integration, the initial setup may appear complex, but long-term benefits make it a strategic investment. Potter pointed out the financial advantages of early adoption.
“Whatever that initial incurrence of that integration, when you look at the ROI in terms of cost savings, it really feeds into itself,”
she stated. Chang echoed this sentiment, stressing the importance of offering multiple payment options.
As digital payments continue to evolve, pay by bank stands out as an efficient, secure, and cost-effective option for merchants. While adoption is still growing, businesses that implement this payment method early may gain a competitive advantage. The ability to reduce costs while enhancing convenience can position pay by bank as a strong alternative to traditional payment methods in the future.
