The Future Of Payments: How Pay By Bank Is Revolutionizing Personalization Across All Industries

The market for traditional, physical card payments is shrinking. Amid the COVID-19 pandemic, a survey by Chase uncovered that 73% of respondents said contactless payments were a more convenient form of payment. Globally, digital wallets recently became the leading payment method both in e-commerce and at POS. As consumers turn to digital payment methods, such as Apple Pay, P2P transfers, or storing payment details online, these alternatives to traditional credit cards become just as convenient, if not more so, than traditional payment cards. 

Similarly, pay by bank is an emerging field of digital payments that has grown in popularity, particularly recurring bill payments. The idea of pay by bank may sound cumbersome. Requiring a bank account and routing number inputs for every payment sounds like a hassle. However, with open banking, there is a massive push to make logging in, authenticating credentials, and saving these details much easier and faster for end users. 

We’re moving into a world where we no longer need physical credit cards to make payments. And it’s important for merchants to understand the benefits of pay by bank and why they should incentivize their customers to use this method of payment. 

The Benefits Of Pay By Bank

Reduced Payment Costs

The main push for pay by bank has come from merchants, who have found that this method of payment can provide massive savings on “swipe” fees that come from card use. The 2.5%  to 3% transaction fees for card transactions add up to a significant cost. Instead of paying this fee, merchants can incentivize users to pay by bank and pass some of the savings on to consumers. Mobile and internet providers have already made this practice commonplace and offer a $5 to $10 discount when paying by bank.

For users, there is not only the shared savings benefit, but also an increased speed in savings. Instead of waiting for credit card points and cash back rewards to show up in their account weeks to months later, customers can save immediately on frequent purchases. 

Understand Your Users 

Another massive benefit of pay by bank, that is just beginning to emerge, is increased personalization. When a user pays by bank, they can opt in for the merchant to see all of their transaction and spending data. Seeing this personal data can help merchants better understand their customers and learn how to better serve them by tailoring the customer experience. There are three big opportunities that come with the ability to see users’ transactions:

• Reduce Churn: If a merchant can see hints from a user's transactions of inactivity or disinterest, the merchant can act to prevent it by providing them with a special offer. For example, if Netflix can see that a customer has started paying for other streaming services like Hulu and Disney+ and has spent less time watching Netflix, they can provide special offers that incentive subscription renewal. 

• Promote Effectively: With access to a user's transactions, merchants can understand the lifestyle and preferences of their customers. This allows merchants to create more effective marketing and promotions that align with the customer’s interests, lifestyles, and immediate needs. For example, if an Xfinity customer paying for in-home wifi and cable has some transactions that indicate they are opening a small business, Xfinity can market their small business package to them. By surfacing the offer at the right time, consumers are more likely to take advantage of the service. 

• Fuel Innovation: Companies spend a lot of time and money on marketing research – gathering data on customers through focus groups, customer surveys, and other means. However, transaction data can eliminate the need for these methods and can help companies quickly understand their customers needs and wants. It can help companies to innovate and develop new products, or even inform which new brands to carry. For example, if Target can see that many of their customers have begun purchasing cosmetics from a new small online store, they can send procurement teams to start stocking products from that brand. 

But aside from these examples, there are endless additional opportunities when it comes to increased personalization and better customer engagement using transaction data.

The Benefit To Customers

Companies often fail to clarify the benefit to the customer for sharing their transaction data. However, if you can demonstrate savings or increased personalization, customers are willing to share their information with trusted merchants. It’s a win win – for both the merchant and the end user. 

Revolutionizing Payments and Personalization

Companies who opt in to pay by bank will be better positioned to offer better, more personalized experiences. In addition to company savings on the cost of credit card transactions. It is imperative across all industries that companies understand the necessity of adding pay by bank to avoid being left behind. It will impact more than fees, but may result in a loss of customers due to a generic customer experience.