Independent Banker - September 2023 - 25

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there's a potential impact on
operating costs.
2. More deeply connected
customers. On the upside, Pay
by Bank puts the community bank
at the center of the payment, as
opposed to solutions like PayPal
or Venmo, which take customers
outside traditional banking
infrastructure. It also offers a way
to support business customers in a
tighter economic environment.
" This is an exceptional
opportunity to support local
merchants who could incentivize
their customers to pay with good
funds at a lower cost with faster
access to funds, " says Elspeth
Bloodgood, technical product
manager for consumer and
commercial payments at Jack
Henry. " As institutions build out
their payments strategy, they
should look at the composition of
their business customers and see
where they can develop tighter,
stickier products and provide better
payment services. "
3. Risk and fraud mitigation. As
with any new product, there are
a host of risk and fraud elements
at play. Banks offering such a
service will have to ensure that
the payment is authenticated and
protected, thereby safeguarding
against fraud.
" The question is, how do you
keep consumers secure and avoid
funds being drained into a bad
" It's still new and hard to predict
when or if Pay by Bank will take
off ... but community banks are
eager to learn more to ensure
they are taking the right steps
to remain competitive. "
-NICK DENNING, ICBA BANCARD
actor's account? " says Bloodgood.
" We're seeing some interesting risk
mitigation in one-use QR codes that
will make these payments secure. "
A proactive Pay by Bank strategy
For now, community banks should
continue to monitor the evolution
of Pay by Bank, but at the same
time, they might consider strategies
around card programs.
For example, community banks
can strengthen rewards offerings
and ensure that their customers take
full advantage of them. In addition,
they can remind consumers of
the protections afforded to them,
the security that surrounds card
transactions and the ease of their use
in digital wallets.
In short, proactively sharing the
common benefits of card transactions
will help customers better
understand the reasons to use them.
" It's a good idea for community
banks to make sure that their
customers are aware of the value of
their card programs, the protections
that they offer and why paying with
a debit card or a credit card may
make sense for the individual, "
Denning says.
The future of Pay by Bank
Even though it's gaining traction,
the future of Pay by Bank remains
uncertain. According to Mercator
Advisory Group, " Pay by bank has
potential. " However, they also
conclude, " Once inflation begins to
ease up, consumers will jump back to
their credit cards, particularly when
cash is short. "
More from ICBA
Visit ICBA Bancard's Digital Payments Transformation resources
to assess how Pay by Bank could affect your community bank's
payment strategy. bit.ly/ICBAdigitalpayments
Only time will tell how Pay by Bank
evolves in the U.S., but it's worth
community banks' attention in the
near term.
" Pay by Bank is one of those
emerging payment topics that is
good for community banks to pay
attention to and be educated about, "
says Denning. " That being said, this
isn't going to scale overnight, and
it's OK for community banks to take
their time in figuring out the right
next step, while weighing against
other priorities. "
Colleen Morrison is a writer
in Maryland.
independentbanker.org // 25
http://bit.ly/ICBAdigitalpayments http://www.independentbanker.org
Independent Banker - September 2023

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