See how Pay by Bank can help platforms level up their payments strategy
Europe’s payment innovation, Open Banking, has transformed the fintech landscape, opening up vast possibilities not only for payment platforms but for eCommerce and its users. One of the most compelling applications of Open Banking is Pay by Bank, a direct account-to-account (A2A) payment method that allows customers to bypass traditional card networks. This alternative approach enables faster, cheaper, and more secure transactions.
The power of Open Banking in payments
Open Banking is a financial technology framework that allows third-party providers, such as fintech companies, to securely access bank customers' financial data through standardized application programming interfaces (APIs), with the customer's consent. It enables interoperability between banks and non-bank entities, fostering innovation in financial services by providing users with a broader range of banking options and tailored products.
One of the most promising use cases within Open Banking is Pay by Bank, an A2A payment method gaining traction among businesses worldwide. By leveraging secure, real-time bank transfers, Pay by Bank is quickly becoming a preferred payment option for companies looking to reduce payment cost and payment friction while speeding app payment settlement.
This is especially impactful for B2B platforms, where cash flow is paramount. As PYMNTS highlights, “money in the bank—in its most literal sense—is among the most critical components of security.” The ability to efficiently receive payments ensures that operations run smoothly, allowing businesses to meet expenses, pay for inventory, and keep their workforce supported.
Why Pay by Bank?
Pay by Bank enables instant, secure bank-to-bank transfers, reducing reliance on card networks and eliminating interchange fees, saving them up to 85% on the total payment costs.
It also streamlines processes, reducing administrative workload for financial services platforms and accelerates account reconciliation, enhancing overall financial management efficiency. In this sector, conversion rates average 78%, with users appreciating the security and speed offered by account-to-account (A2A) payments.²
Benefits of Pay by Bank for platforms and marketplaces:
1. Accelerated access to cash and improved reconciliation. With Pay by Bank, funds move directly between accounts, providing businesses quicker settlement and access to cash. This capability supports cash flow, allowing platforms and marketplaces to meet payment obligations on time.
2. Lower transaction costs. Traditional card payments incur processing fees of 1-3% per transaction, but Open Banking bypasses these card networks, resulting in substantially lower fees. For businesses operating at scale, this reduction can yield significant savings, improving profitability.
3. Full control over banking experiences via webhooks, ensuring seamless payment initiation. Use webhooks to gain real-time insights and build a responsive payment experience. Initiate and track bank payments programmatically - no manual intervention needed.
4. No chargebacks, faster refunds. Open banking enables secure, direct bank-to-bank payments with multi-factor authentication and real-time account verification, significantly reducing the risk of unauthorized or insufficient-fund transactions. By bypassing traditional card networks, it eliminates the chargeback process and instead relies on streamlined refund processes.
5. Reduced involuntary churn. For on-demand platforms and subscription-based businesses, seamless payment methods like Pay by Bank can reduce involuntary churn caused by failed card payments, keeping customers engaged and minimizing disruptions.
6. Enhanced security. With bank-level authentication, Pay by Bank offers stronger security than traditional card payments. This robust security infrastructure reduces fraud risk, making it an appealing choice for businesses and customers alike.
7. New payments economics. Platforms can leverage their loyalty programs to increase Pay by Bank adoption. They can, for example, connect pay by bank to their loyalty ecosystem by corresponding payment amounts to points. This can in turn create a flywheel for a virtuous cycle by increasing customer lifetime value (CLTV) and adopting of a more cost-effective payment method.
8. Higher approval rates. Traditional card payments sometimes encounter declined transactions due to card expiration, network issues, or spending limits. Pay by Bank’s direct account authentication helps improve approval rates, creating a smoother experience for customers. In mature markets like the UK and Nordics, the average conversion rate for first-time users ranges from 80% to 90%, increasing to over 90% for returning users.
According to recent findings, 84% of pay-by-bank users report high satisfaction with their payment experience, citing speed and ease of use as major advantages and offering a reliable, user-friendly process, Pay by Bank enhances the customer journey, leading to improved retention and satisfaction.
Benefits for customers
For customers, Pay by Bank offers several unique advantages:
1. No dependency on card limits - pay directly from a bank account. Avoid declined transactions due to card limits. With Pay by Bank, funds come directly from the payer's bank account, giving them full control.
2. Improved security. Transactions are authenticated directly through the customer’s bank, which minimizes the need to share sensitive information and reduces the risk of fraud.
3. Convenience and speed. Users pay in as little as a couple of clicks, completing checkout in less than 40 seconds, minimizing drop-off from excessive redirects or having to enter card details. Transactions occur in real-time, meaning quicker order confirmations and faster access to services.
4. Greater Control. Pay by Bank enables customers to authorize each transaction individually, providing more control and transparency over spending.
Why Mangopay's Pay by Bank solution?
Mangopay’s Pay by Bank is optimized to support platforms offering a seamless and secure experience that includes advanced verification capabilities. Verification is critical within Open Banking, especially for Pay by Bank transactions, as it ensures smooth onboarding and mitigates fraud risks. By coupling Pay by Bank with account verification and continuous validation features, Mangopay is uniquely positioned to deliver a secure, user-friendly payment experience that drives trust and reduces barriers to adoption.
With Mangopay, platforms can access Pay by Bank as a new payment method within the same integration while having access to all other features within the Mangopay ecosystem, such as our programmable wallets, cost-effective global payouts, FX payment,s and more.
How to get started with Pay by Bank?
Ready to add Pay by Bank to your checkout?
Reach out to our team to activate this payment method.
Sources:
