As digital payments evolve, pay by bank is gaining traction in consumer-facing sectors.
The payment method is in its early stages, but it’s already helping reduce cart abandonment, improve data security and lower transaction costs.
The PYMNTS Intelligence report “Cost Concerns Hinder Merchants’ Pay-by-Bank Adoption — but Current Payments Could Cost More” found that despite concerns over cost and complexity, pay by bank could be more cost-effective than traditional payment methods like credit and debit cards.
The Benefits of Pay by Bank for Early Adopters
Consumer-facing companies that have adopted pay by bank are seeing advantages, according to the report. All the companies surveyed reported lower cart abandonment rates, highlighting their effectiveness in keeping customers engaged. Additionally, 80% of businesses using pay by bank said enhanced data security for their customers was a benefit.
The ease of use for consumers, also noted by 80% of respondents, was another key factor in driving pay by bank’s popularity. These benefits are especially important for sectors such as retail, grocery, betting, ridesharing, telecommunications and utilities, where user experience and security are top priorities.
Cost Concerns Hinder Wider Adoption
Despite the benefits, cost concerns remain a barrier to the wider adoption of pay by bank. According to the report, 78% of companies that have yet to implement pay by bank expressed worries about the potential costs involved. This concern is valid, given the upfront expenses required for system integration and customer education. However, many businesses may not fully realize that the cost of continuing with traditional card-based payment methods can be substantial.
On average, companies reported paying between 4% and 10% of their revenue on credit card processing fees, chargebacks, fraud losses and other associated costs. This high cost of traditional payments highlights the potential for savings with pay by bank, making it an attractive option in the long term, even if initial investment is required.
Incentives and Consumer Attraction
To overcome the initial resistance to adopting pay by bank, many companies are looking at incentives to encourage consumer uptake. According to the report, 95% of businesses offering or considering pay by bank would be willing to offer cash back rewards to consumers as an incentive. Additionally, 68% would provide purchase price discounts, typically around 2%.
This aligns with consumer preferences, as many are more likely to switch to pay by bank if they receive rewards or fraud protection. The report found that 79% of businesses are already offering or willing to offer fraud protection to incentivize customers to use this payment method. Such incentives are key to driving adoption, especially in competitive sectors like retail and ridesharing, where price sensitivity is high.
