Cash, check or charge? How quaint. The way we move money — and what we consider money — has changed dramatically over the last decade. The use of cash is declining, and personal checks are largely on life support. Consumers are looking for greater choices like mobile payments, crypto wallets, and person-to-person payment apps, which are taking their place alongside staple payment methods like cards and bank-to-bank ACH payments.
But technology is transforming even as consumer expectations for seamless payments rise. The latest twist on ACH payments— which account for trillions of dollars of volume each year and continues to grow — is the application of open banking technology and makes the process even simpler and more secure.
Launched by J.P. Morgan Payments and Mastercard, Pay-by-Bank is an ACH payment that uses open banking, which enables consumers to permission their financial data to be shared seamlessly between trusted parties to let them pay bills directly from their bank account with greater security. No longer will they be faced with the tedium of typing in routing and account numbers each time they need to pay a bill. For billers and merchants, it automates consumer onboarding and reduces the risk and cost of storing bank account information.
Pay-by-Bank holds huge potential for billers to take the pain out of recurring payments such as rent, utilities, payments to government, tuition, insurance, and health care where ACH is the primary medium of payment.
Billers whose consumers already pay with ACH can choose to integrate the J.P. Morgan Payments Pay-by-Bank solution on their existing payments page. At checkout, consumers select “Pay-by-Bank,” where they will be prompted to find their bank, verify themselves using their own bank’s familiar authentication process — a biometric scan, for example — and securely share their bank account information with JPMC to complete the payment on behalf of the biller.
J.P. Morgan Payments and Mastercard are piloting Pay-By-Bank with a small number of U.S.-based billers and merchants this year and expect to expand in 2023.
“Our aim is to stay at the forefront of payments innovation,” says Max Neukirchen, head of Payments & Commerce solutions, J.P. Morgan Payments. “We’re delighted to work with Mastercard on this solution as their open banking capabilities will transform the payment experience. Together, we will offer an attractive, simple and secure Pay-by-Bank solution that gives choice to our clients and their customers who use ACH as their payment mechanism. This is part of J.P. Morgan Payments’ vision to accept any payment, anytime, anywhere.”
“Billers and consumers both get greater payment choice,” says Chiro Aikat, executive vice president, Merchants & Acceptance, Mastercard North America, “but the partnership also propels payments innovation on two fronts — in the ease of the user experience and in the security of data sharing.”
“The technology behind Pay-by-Bank reduces the likelihood of unauthorized transactions and frees our clients from the need to retain — and the responsibility to securely maintain — consumer banking information,” Neukirchen says.
Pay-by-Bank also uses machine learning in Mastercard’s Smart Payment Decisioning Tools to analyze the best time to initiate the payment based on the bill payer’s historical transaction behavior and risk patterns, which protects the consumer and merchant by ensuring important payments get made and can reduce the risk of returns due to insufficient balance.
Pay-by-Bank is yet another innovation in which open banking lets people and businesses across the globe safely share their data to access innovative experiences, from new ways to pay to secure and frictionless lending, bringing the promise of the digital economy to more people. Mastercard brought its payments expertise and experience into the world of account-based payments in 2017 with the acquisition of Vocalink. Since then, the company continued to focus on efforts that deliver greater choice and security in financial service experiences including investments in open banking like the acquisitions of Finicity and Aiia.
“We realized years ago that the way people think about money and commerce is changing,” Aikat says. “They want to pay and get paid how they choose, where they choose and when they choose. We’re excited by this new partnership with J.P. Morgan Chase, and our opportunity to empower people with enhanced payment experiences.”
