Businesses Use Credit Card Tactics to Boost Pay by Bank

A new report suggests that while initial cost concerns may deter merchants from adopting pay by bank, the long-term financial and operational benefits for consumer-facing businesses could be substantial, potentially surpassing the expenses of traditional payment methods.

The pay-by-bank study, produced by PYMNTS Intelligence in collaboration with Trustly, examines U.S. consumer-facing goods and service companies’ awareness of and interest in pay-by-bank payments. Drawing on a survey of 40 U.S. companies generating revenues of $100 million or more, the report also explores the effectiveness of various incentives in driving the adoption of this emerging payment method. While acknowledging merchant hesitations around implementation costs, the study makes a compelling case for pay by bank as a potentially more economical and beneficial alternative to existing payment infrastructure.

The findings indicate that many companies, particularly larger firms, express interest in pay by bank, driven by its competitive advantages, such as enhanced transaction security and efficiency. Companies using pay by bank report high satisfaction, experiencing concrete advantages like reduced cart abandonment and improved data protection for consumers.

The report also suggests that the economic analysis often favors pay by bank, implying that current payment methods, such as credit and debit cards, may impose higher long-term costs on businesses.

Key findings from the report highlight the positive outlook for pay by bank:

Significant Cost Efficiencies: Consumer-facing companies incur substantial costs for existing card payment methods, with some paying over 10% of their revenue. On average, companies pay around 7% of their revenue when accounting for factors like interchange rates, chargebacks, false positives and fraud losses. The report indicates that pay by bank could be considerably more cost-effective, suggesting potential savings of up to 8% compared to credit payment options if all credit card users switched. For example, a company generating $1 billion in revenue could see $12.4 million in annual savings by offering a 5% discount for pay by bank, if all consumers transitioned.

Proven Benefits for Early Adopters: For companies already leveraging pay by bank, the benefits are evident for both their businesses and customers. All surveyed companies that offer pay by bank reported lower cart abandonment rates. Furthermore, 80% of these companies cited improved security for customers’ money and data, and the ability to accept international payments as key advantages. This strong satisfaction among early adopters underscores pay by bank’s capacity to deliver concrete operational improvements and enhanced customer trust.

High Willingness for Incentivization: A notable finding is the high willingness among merchants to incentivize pay by bank adoption. Ninety-five percent of companies offering or interested in pay by bank would incentivize consumers with cash-back rewards. Additionally, 79% are open to providing fraud protection. Merchants are comfortable offering an average discount of about 2%, which aligns with the incentives needed to sway consumer behavior in non-retail sectors. This proactive stance on incentives suggests that companies recognize the value proposition and are prepared to invest in encouraging customer adoption.

Beyond direct cost savings and transaction efficiencies, the report also illuminates other compelling benefits driving merchant interest in pay by bank. An overwhelming 95% of companies interested in pay by bank view increased customer attraction and retention as an important benefit, alongside a similar share citing the importance of reducing fraud costs. The ease of use for consumers is also widely recognized as a key advantage, noted by 73% of interested companies.

While initial implementation costs and the challenge of building customer trust are acknowledged concerns, the overarching sentiment among companies is that pay by bank offers a promising future. The study suggests that focusing on the long-term savings potential and clear implementation strategies can overcome short-term cost perceptions, positioning pay by bank as a strategic investment for businesses aiming to optimize their payment ecosystems and enhance customer satisfaction.