NEW YORK—The use of Pay by Bank is accelerating quickly outside the U.S., driven largely by open banking, a sign that its limited use in the U.S. may pick up, as well.
Pay by Bank is a payment method that allows consumers to make online purchases directly from their bank accounts, without the need for a credit or debit card.
According to GlobalData, recent reports show online payment methods are evolving, with Pay by Bank emerging as an increasingly popular option based on the factors consumers are prioritizing at checkout.
“Specifically, the increased levels of security and ease of use. Now, a new wave of Pay by Bank solutions—also known as account-to-account or A2A payments—powered by open banking is driving this shift even further. These modern payment rails can offer secure, convenient, and instant payments, which is what both consumers and businesses want,” GlobalData said.
Who’s Winning The Race?
Some countries are outpacing others. When it comes to familiarity and usage of Pay by Bank, significant differences emerge, GlobalData said.
“For instance, recent survey data reveals that 92% of respondents in Spain and 90% in the U.K. are familiar with Pay by Bank, yet neither can surpass the Netherlands, where an impressive 97% have at least some familiarity with the method. In Germany, two-thirds (67%) of survey respondents are familiar with Pay by Bank, while in France, only 28% have heard of it,” GlobalData said.
In terms of frequency of Pay by Bank usage, the Netherlands also leads, with 84% using it at least monthly. Spain surpasses the U.K. in daily, weekly, and monthly online usage of Pay by Bank, while Germany has slightly fewer daily users than the U.K.
The recent Instant Economy Payment Insights report shows that Pay by Bank is most popular among young adults aged 18-29. In Spain, 59% of this age group use the method daily or weekly, while in Germany, around 25% do the same, GlobalData said.
“Interestingly, the Netherlands stands out as the only market where the 30-39 age group (72%) uses Pay by Bank more frequently than the 18-29 group (65%) for daily or weekly purchases,” GlobalData said.
Speed Is Critical
Speed is a vital component of what makes an online payment method successful, noted GlobalData.
“This is one of the reasons behind the emergence of Pay by Bank. It’s a hassle-free payment method that uses readily available information instead of requiring card details, with transactions instantly reflected in the user’s bank account,” GlobalData said.
Speed is especially important to Gen Z (18-29 year-olds). Research reveals that 39% of this age group rank it as a top priority when choosing an online payment method, some 5% higher than other age groups, GlobalData noted.
“While the need for speed is clear, security remains a crucial consideration for consumers when choosing an online payment method, with its importance increasing with age,” GlobalData said. “Among Gen Z users, 51% rank security as a top-three concern. However, for those aged 60 and above, security is a top concern (71%).”
A PYMNTS study from December 2023 shows that 39% of U.S. consumers are not likely to use Pay by Bank, despite incentives, and a further 20% are only likely to use Pay by Bank if incentives are offered.