Bank of America announced that it is rolling out a solution that will allow buyers to make e-commerce purchases in the UK directly from their bank account in real time. Here’s how the solution is described to work:
1. A customer adds an item to their online shopping cart and proceeds to the checkout page.
2. They select the “Pay by Bank” payment option and then their own personal bank from the menu.
3. To authenticate payment, they simply validate using their existing login credentials through their online banking platform.
4. Once authenticated, the payment is sent directly from the customer’s bank to the company’s account.
5. The customer is returned to the checkout page and the transaction is complete.
Pay by Bank capabilities are fairly common in Europe and typical in Asia. Merchants enjoy the instant recognition of the purchase amount though the real time network behind these transactions. Since interchange on card transactions is regulated in the UK and EU, merchants aren’t saving much money from avoiding card processing fees, but they do avoid pesky consumer chargeback transactions.
Also announced today in the Wall Street Journal is an announcement that Discover, through a partnership with BIM, will be offering a pay with your bank account here in the U.S. Consumers in the U.S. may be less inclined to use this solution if they are fans of credit card rewards, but debit card users may adopt the solution, particularly if the merchant will offer an incentive.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group