The future of open banking in the U.S. remains uncertain due to evolving regulatory frameworks. Despite this, payment methods utilizing open banking, such as pay by bank, are gaining attention. This payment option allows direct transfers between bank accounts without relying on traditional card networks. Merchant interest in pay by bank is increasing as they seek alternatives to lower transaction costs. However, consumer adoption challenges persist, as many still prefer credit and debit cards. Companies involved in open banking are exploring ways to encourage broader usage.
Regulatory uncertainty has been a recurring issue in open banking discussions. Previous reports highlighted concerns surrounding data security, consumer protection, and banking competition. While some countries have implemented structured regulations, the U.S. has yet to formalize comprehensive rules governing data sharing between financial institutions and fintech companies. Compared to earlier expectations, progress in open banking adoption has been slower, with many consumers remaining hesitant due to unfamiliarity with its benefits.
How Can Consumers Be Encouraged to Use Pay by Bank?
One of the key challenges in expanding pay by bank lies in consumer behavior. Many are accustomed to using credit and debit cards and see little reason to switch. Merchants are working on educating customers about the advantages of bank-direct payments, including potential cost savings and security benefits. Research indicates that while nearly half of consumers express interest in open banking payments, only a fraction have used them. This suggests that awareness alone is not enough; additional incentives may be required.
What Role Do Loyalty Programs Play?
Loyalty programs could be a significant factor in driving consumer adoption of pay by bank. Alexandre Gonthier, CEO of Trustly Inc., emphasized the importance of incentives in shifting consumer habits.
“Loyalty programs will provide that consumer incentive to switch,” he said.
Data suggests that when consumers are offered cashback or rewards, their willingness to use alternative payment methods rises substantially. Merchants can leverage their existing loyalty structures to encourage repeat usage of pay by bank services.
Security is another consideration for both consumers and merchants. When using bank-direct payments, consumers benefit from fraud protections under financial regulations. Gonthier highlighted that bank-based payments provide more transparency in assessing risk.
“Open banking gives us granular visibility into a consumer’s risk profile,” he said.
This capability allows for optimized pricing structures, potentially making transactions more cost-effective for businesses.
Another factor influencing adoption is convenience. In European markets, pay by bank transactions are increasingly streamlined through biometric authentication. Trustly’s European operations demonstrate that reducing friction during checkout can enhance user experience. Applying similar methods in the U.S. could lead to greater acceptance among consumers who prioritize seamless payment processes.
Looking ahead, installment options may further support pay by bank expansion. Allowing consumers to defer payments without relying on credit cards could make the method more attractive. According to Trustly, installment features could address situations where individuals need flexibility for essential purchases.
“You’re turning a bill that’s due today into a bill that you can pay 30 days later,” Gonthier stated.
Such options could appeal to a broader demographic, particularly those seeking alternatives to traditional debt-based payment methods.
The trajectory of open banking adoption in the U.S. remains dependent on regulatory developments and consumer engagement strategies. While some barriers exist, merchants and financial technology firms are actively refining their approaches. Incentives like loyalty rewards, enhanced security measures, and flexible payment plans could collectively strengthen the case for bank-direct payments. As more businesses explore these options, the landscape of digital transactions may gradually shift toward greater reliance on open banking solutions.
