Independent Banker - September 2023 - 24

PORTFOLIO
FOCUS PAYMENTS
What does Pay
by Bank mean for
community banks?
Now that FedNow has launched, it's time to put some focus on a
new payments form: Pay by Bank. By Colleen Morrison
n 2022, the industry witnessed the
initial fluttering of announcements
about a new service called " Pay by
Bank. " J.P. Morgan announced it was
partnering with Mastercard. Bank of
America launched Pay by Bank in the
U.K. and, a few months later, made
it available in Europe. While these
examples point to nascent offerings,
they make Pay by Bank a topic to
watch for community banks.
" Around the globe, the emergence
of instant payments, coupled with
enhanced regulation and standards
around open banking, have fueled
innovation in this space, " according to
Nick Denning, senior vice president
of payments industry relations at
ICBA Bancard.
" It's still new and hard to predict
when or if Pay by Bank will take off
and how much market share it will
get, but community banks are eager to
learn more to ensure they are taking
the right steps to remain competitive. "
What is Pay by Bank?
Pay by Bank is a way for a consumer
or business to make an e-commerce
or point of sale purchase using their
bank account.
The user experience leverages open
banking for a seamless connection,
and the underlying payment moves
either via ACH or an instant/realtime
payment system. The goal is to
create a frictionless experience for the
customer, keeping the bank central to
the payment.
But for the bank, there are business
and operational considerations
to implement a Pay by Bank
offering, including:
1. Impact on operating costs. Pay
by Bank creates a new payment
offering for consumers and a more
cost-effective one for businesses.
Yet, with this new option,
merchants can sidestep interchange
fees, and for the bank, that means
I
24 // ICBA Independent Banker // September 2023
Illustration by PaleStudio/Adobe

Independent Banker - September 2023

Table of Contents for the Digital Edition of Independent Banker - September 2023

Contents
Independent Banker - September 2023 - Cover1
Independent Banker - September 2023 - Cover2
Independent Banker - September 2023 - Contents
Independent Banker - September 2023 - 2
Independent Banker - September 2023 - 3
Independent Banker - September 2023 - 4
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Independent Banker - September 2023 - 6
Independent Banker - September 2023 - 7
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Independent Banker - September 2023 - Cover3
Independent Banker - September 2023 - Cover4
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