As credit card fees climb and fraud disputes surge, a growing number of merchants and banks are rallying behind a new wave of payment infrastructure: pay-by-bank.

The idea is simple but powerful—let consumers pay directly from their bank accounts without relying on card networks or third-party processors. For years, this promise has lingered on the edge of mainstream adoption, held back by poor UX, security concerns, and clunky bank integrations. But with advances in biometric authentication, real-time settlement, and persistent user identity, that’s starting to change.

Why Pay-by-Bank Has Struggled

Despite years of enthusiasm, most pay-by-bank efforts have failed to scale. The reasons are familiar:

  • High checkout friction: Many solutions redirect users to bank portals, triggering multiple logins and causing dropoff.
  • Outdated authorization flows: Credential scraping and micro-deposit verification not only introduce fraud risk but also delay transaction settlement.
  • Reliance on intermediaries: Even so-called direct payment methods still run through aggregators like Stripe or PayPal, diluting the benefits and economics of bank-to-bank payments.
  • No persistent identity: Users often start from scratch each time they pay, unable to reuse verified identities or preferences.

The result? Poor conversion rates, limited merchant adoption, and a lack of incentive for banks to play an active role.

What’s Changing Now

A new generation of pay-by-bank infrastructure is emerging—one that solves these legacy issues through:

  • One-time bank linking with biometric authentication (e.g. Face ID or fingerprint) that eliminates passwords and redirects.
  • Reusable user credentials, allowing consumers to pay across merchants without re-verifying.
  • Cryptographic proof of intent that drastically reduces fraud and chargebacks.
  • Real-time or near-instant clearing, removing batch processing and reconciliation delays.

This evolution isn’t just about better UX. It enables meaningful improvements in cost and performance:

  • 94% lower processing fees compared to credit card rails
  • 40–60% better conversion at checkout vs. legacy pay-by-bank flows
  • Near-zero fraud and chargeback costs

A New Role for Banks

Perhaps the most transformative shift is what this means for banks. Instead of acting as dumb pipes behind payment processors, banks can now:

  • Embed compliance and identity verification into the payment experience
  • Reclaim a role in the transaction flow, gaining visibility and user data
  • Monetize their own payment rails, rather than outsourcing economics to aggregators

This opens the door for new bank-led experiences at the point of sale, and a future where financial institutions own more of the value chain.

Where It’s Headed

Pay-by-bank is gaining traction first in sectors where economics matter most: high-ticket e-commerce, digital platforms, and marketplaces. These are environments where even marginal improvements in take rate, fraud reduction, or reconciliation speed have a big impact on margin and cash flow.

What’s next? Expect support for recurring payments, global bank integrations, and tokenized money to further blur the line between traditional banking and programmable finance.

The bottom line: the infrastructure for direct, secure, low-cost payments is finally here, and it’s moving fast. As merchants and banks alike look to reclaim control over costs, data, and customer relationships, pay-by-bank may be the most important trend in payments you’re not watching closely enough.