Every time a customer checks out with a card, merchants lose a portion of the transaction to payment processors, card networks, and fraud disputes. These fees have become a hidden tax on digital commerce. For a business processing one million dollars a month, this can mean over thirty thousand dollars lost to payment costs alone.

Pay-by-bank is changing that. By allowing customers to pay directly from their bank accounts, it eliminates unnecessary middlemen, slashes transaction costs, and returns control to merchants and banks. What was once a backend utility is now becoming a competitive advantage.

The Problem with Card Payments

Credit cards were never designed for the internet. Their infrastructure is slow, expensive, and increasingly vulnerable to fraud. Static card numbers are easily compromised, leading to billions in chargebacks every year. Settlement times often take multiple days, which slows down cash flow and increases dependency on working capital loans.

Fees are the most obvious pain point. With interchange, assessment, and processing charges combined, merchants regularly give up 2 to 3 percent per transaction. That might seem manageable on the surface, but over time it drains profitability. The worst part is that this model benefits intermediaries, not the businesses doing the selling.

How Pay-by-Bank Works

Pay-by-bank allows consumers to authorize payments directly from their bank accounts, typically using biometric authentication like Face ID or fingerprint. There are no cards, no wallet apps, and no redirects. Once a customer links their bank account, they can pay anywhere with a single tap.

Behind the scenes, these payments move through real-time rails such as FedNow, RTP, or open banking APIs, depending on the market. Funds settle faster, transaction costs are dramatically lower, and the entire experience is cleaner for both merchants and customers.

Why Merchants Are Making the Switch

For merchants, the benefits start with margin. By bypassing card networks and acquirers, pay-by-bank reduces transaction costs by over 90 percent in many cases. That means a higher take rate without needing to increase prices or cut back on services.

Faster settlement is another advantage. Real-time or same-day transfers help merchants improve cash flow and reduce reliance on credit. This is especially important for marketplaces, subscription platforms, and high-volume e-commerce businesses that need to move money quickly.

Security also improves. Since there are no card numbers or CVVs to steal, the risk of fraud plummets. This reduces operational burden and eliminates the constant threat of chargebacks.

Why Banks Are Back in the Picture

For years, card networks pulled banks out of the center of the payment flow. Pay-by-bank reverses that trend. With modern infrastructure and strong authentication, banks are once again positioned to play a lead role in digital commerce.

Banks can now monetize their own rails, offer services like fraud detection and compliance, and build direct relationships with merchants. They become partners in the transaction instead of just endpoints. This opens new revenue streams while improving the value they provide to their customers.

Real-World Adoption

Pay-by-bank is already gaining ground in sectors where traditional payments create the most friction. In high-ticket e-commerce, merchants appreciate the savings and fraud protection. In B2B, real-time account-to-account payments make invoicing and reconciliation more efficient. Subscription platforms benefit from improved billing reliability, with no more failed payments due to expired cards.

Marketplaces, especially those that handle large volumes or frequent payouts, see an immediate improvement in margins and settlement flow. And as consumer trust grows, adoption continues to climb.

What About Customer Behavior

One of the biggest questions merchants ask is whether customers will actually use pay-by-bank. The short answer is yes, especially when the experience is seamless.

Shoppers are motivated by ease, speed, and security. A one-tap biometric payment checks all three boxes. If merchants pass along even a small portion of the savings through cashback, loyalty rewards, or discounts, consumer adoption happens quickly.

The success of similar systems in markets like Brazil, India, and the UK proves that behavior shifts when the incentives and user experience align. With better infrastructure now live in the United States and Europe, the same pattern is starting to take shape.

A Better Way to Pay

Pay-by-bank is not just another payment method. It represents a shift in who owns the economics of a transaction. Instead of giving away margin to legacy networks, merchants can now keep more of what they earn. Banks can reclaim their role as infrastructure providers. And customers get a checkout experience that is faster, more secure, and more aligned with the digital economy.

In a landscape where every percentage point of margin matters, it makes sense to rethink the rails your business runs on. Pay-by-bank is no longer a theory. It is a practical path forward.