Pay-by-Bank: The Emerging Payment Solution U.S. Businesses Should Know

As the payments landscape rapidly evolves, businesses and consumers are increasingly turning to innovations that streamline transactions, reduce costs, and enhance security. One of the most exciting developments in this space is pay-by-bank, a direct bank-to-bank transfer payment method that’s gaining significant traction in the U.S. This method offers a compelling alternative to traditional payment options, including credit cards, by offering lower fees, faster settlement times, and enhanced security.

If you're new to pay-by-bank, check out our previous blog post to understand the basics of how it works and how it's transforming the online payment ecosystem.

Let’s explore how pay-by-bank will continue to evolve in the U.S. market and what its future holds for businesses and consumers.

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What's Next for Pay-by-Bank in the U.S.?

Pay-by-bank is at the forefront of a payment experience revolution. As more businesses and consumers embrace the benefits of account-to-account payments, this bank-based payment solution will continue to expand. 

Here are some key trends to watch for in the coming years:

• Wider adoption across industries
• Enhanced customer experience
• Improved cash flow and faster settlement times
• Increased trust and security features
• The role of AI and automation in payments

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1. Wider Adoption Across U.S. Industries

While pay-by-bank has already made significant inroads in industries like e-commerce and subscription services, its potential extends far beyond these sectors. As U.S. businesses continue to seek ways to reduce transaction costs and improve user experience, pay-by-bank is set to become a common online payment method in more markets. The rise of real-time payments (RTP), a key component of the pay-by-bank ecosystem, will play a pivotal role in this expansion.

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Key Sectors Benefiting from Pay-by-Bank:

B2B Payments: In the business-to-business (B2B) space, where large transactions and recurring payments are standard, pay-by-bank offers a solution to streamline invoicing and direct transfers between companies. This also helps mitigate the risks of payment errors and fraud, which are particularly important when dealing with high-value transactions.

The 2022 Association for Financial Professionals (AFP) Digital Payments Survey, reports that 33% of B2B payments in the United States are made by check, which is costly and time-consuming. A transition to faster, more secure methods like pay-by-bank could significantly increase efficiency in this sector.

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Utility Payments: For municipalities and utility providers, accepting payments via bank credentials (direct bank transfers) can lower operational costs and reduce the risk of fraud. Using direct bank payments, utility companies can save on transaction fees while offering customers a more secure, simplified way to pay their bills. This trend is gaining momentum as concerns about credit card fraud grow.

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Property Rental: Property management companies, particularly those dealing with large portfolios of rental properties, can also benefit from pay-by-bank. By bypassing costly third-party processors, landlords can improve cash flow, reduce administrative burden, and ensure timely tenant payments. Furthermore, tenants benefit from the convenience and security of paying directly from their bank accounts.

A Zillow study showed that rent payments represent one of the most consistent payment streams in the U.S., making them ideal candidates for automation and payment innovations like pay-by-bank.

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Health and Wellness: The health and wellness industry is booming, with many businesses operating on subscription-based models. Pay-by-bank offers a cost-effective and efficient alternative to credit card payments, helping these businesses avoid high processing fees while improving cash flow. Independent trainers and wellness professionals can also leverage pay-by-bank for hassle-free transactions, ensuring they get paid faster and more securely.

According to a 2023 report from Grand View Research, the global fitness market size is expected to grow at a compound annual growth rate (CAGR) of 7.5%, further driving the need for efficient payment methods like pay-by-bank.

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2. Enhanced Customer Experience

Today’s consumers demand simplicity and security when making payments. With concerns around identity theft, fraud, and the complexity of credit card forms, pay-by-bank offers a much-needed solution. By connecting directly to a customer's bank credentials, this payment method eliminates the need to enter sensitive card details or navigate cumbersome forms. It’s also more intuitive, improving the overall user experience.

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Why Pay-by-Bank Enhances the Consumer Experience:

Simplicity: Consumers only need to authenticate through their bank’s secure platform, reducing friction and making payments quicker and easier. In fact, research from FIS shows that 60% of consumers are likely to choose a payment method that is easy to use and integrates with their online banking.

Security: Pay-by-bank is inherently more secure than traditional credit card payments, as it leverages the robust security protocols of established banking systems. With the growing threat of card fraud, consumers are increasingly looking for safer alternatives to credit cards. Pay-by-bank mitigates these risks by using encryption and tokenization technology.

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3. Improved Cash Flow and Faster Settlements

For many businesses, cash flow is the lifeblood of operations. Traditional payment methods, especially credit cards, often lead to delayed settlements and high processing fees. In contrast, pay-by-bank allows funds to transfer directly from the customer’s bank account to the business's bank account, often in real-time or within a few hours.

Real-time payments: This faster settlement speed improves cash flow, reduces the risk of overdue invoices, and allows businesses to access funds more quickly. This is especially crucial for small and medium-sized enterprises (SMEs) that depend on steady cash flow to manage day-to-day operations.

The Faster Payments Council reports that real-time payments in the U.S. grew by over 30% in 2023, reflecting a broader shift toward faster, more efficient payment methods.

Reduced Transaction Costs: Traditional credit card payments often carry significant fees, particularly for businesses in high-volume sectors. Pay-by-bank payments typically incur lower processing fees, which can add up to substantial savings over time.

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4. Increased Trust and Security Features

Security is paramount in the world of digital payments. As consumers and businesses face increasing threats from data breaches and cyberattacks, pay-by-bank offers a secure alternative. Banks have rigorous security protocols and compliance standards, such as PCI-DSS (Payment Card Industry Data Security Standard), which ensure the protection of sensitive information during transactions.

Biometric Authentication: In addition to robust encryption, some pay-by-bank services, like Aeropay, are integrating biometric authentication methods (e.g., facial recognition or fingerprint scanning) to further enhance security and ensure that only authorized users can approve payments.

According to PwC’s 2023 Global Digital Trust Insights Survey, 64% of U.S. executives believe enhancing cybersecurity and building consumer trust will be a key priority in the next 2-3 years.

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5. The Role of AI and Automation in Payments

The future of pay-by-bank is closely tied to advancements in artificial intelligence (AI) and automation. These technologies will further streamline the payment process, reduce errors, and enhance fraud detection.

AI in Fraud Prevention: AI algorithms can analyze real-time transaction data to identify unusual patterns and flag potential fraud. By continuously monitoring transactions, AI adds an extra layer of protection against fraud and chargebacks.

Automation in Back-office Operations: Automation can handle time-consuming tasks like invoice reconciliation, payment tracking, and reporting, allowing businesses to focus on growth and customer satisfaction.

A 2023 McKinsey report on AI in financial services predicts that AI could reduce operational costs in banking by up to 20%, creating more opportunities for innovation in payment processing.

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The Path Forward for U.S. Businesses

As the U.S. payments ecosystem continues to evolve, pay-by-bank is poised to become a dominant payment method across various sectors. With lower fees, faster settlements, and improved security, it’s an attractive option for businesses looking to streamline their payment processes and boost customer satisfaction.

Whether you're operating in e-commerce, B2B, property management, or health and wellness, adopting pay-by-bank solutions can help you reduce costs, improve cash flow, and stay ahead of the competition. The future of payments is here—and it's all about embracing the next generation of financial institutions and open banking technologies.

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