Pay-by-Bank vs Traditional Payment Stack

• Traditional Model:
In a typical credit or PayPal transaction, customers must enter card details or log into a separate payment account. This involves additional authentication layers that are both time‐consuming and prone to friction.

• Open Banking Disruption:
With pay‐by‐bank, the payment is initiated directly through the customer’s bank using existing online banking credentials. This leverages the bank’s robust security protocols, eliminating the need for a third‐party payment account and reducing steps in the checkout process.

• Savings:
Fewer authentication steps mean lower costs associated with maintaining multiple secure login systems and reduced risk of abandoned carts due to complex checkout flows.

• Traditional Model:
The conventional payment process involves a cascade of intermediaries: payment gateways, acquirers, card networks (Visa, MasterCard), and issuing banks. Each adds its own fee (often totaling around 2–3% of the transaction value) and latency.

• Open Banking Disruption:
Open banking enables a direct bank-to-bank connection where the customer’s bank communicates directly with the merchant’s bank. This bypasses several layers, including costly card network fees and intermediary processors.

• Savings:
By eliminating or minimizing the need for these intermediaries, businesses can save significant amounts on transaction fees, which directly improves their margins.

• Traditional Model:
In a layered payment system, the clearing and settlement process involves multiple parties that can delay funds and complicate reconciliation. Each intermediary requires additional systems to track and settle transactions accurately.

• Open Banking Disruption:
With a direct connection between banks, transactions settle more quickly and transparently. The banks’ existing infrastructures handle settlement, streamlining reconciliation.

• Savings:
Faster settlements improve cash flow for businesses, and simplified reconciliation reduces administrative overhead and the potential for errors.

• Traditional Model:
Multiple layers not only add cost but also increase vulnerability to fraud, requiring additional investments in fraud prevention and compliance mechanisms.

• Open Banking Disruption:
Banks already invest heavily in secure authentication and fraud detection. By using open banking, merchants tap into these established systems, reducing the need for extra layers of security.

• Savings:
Lower fraud risk and streamlined compliance processes translate into reduced costs for fraud prevention, fewer chargebacks, and less administrative burden in monitoring transactions.

• Traditional Model:
Implementing and maintaining a payment infrastructure that interfaces with several payment providers can be complex and expensive.

• Open Banking Disruption:
Pay-by-bank solutions typically require a single integration with an open banking provider, which can then access multiple banks through standardized APIs.

• Savings:
This consolidation minimizes development and maintenance costs while ensuring scalability and adaptability as banking regulations evolve.

By leveraging open banking, pay-by-bank solutions cut through the traditional payment layer cake — eliminating multiple intermediaries, reducing transaction fees, accelerating settlement times, and simplifying compliance. This not only enhances the customer experience with a smoother, faster checkout but also delivers significant cost savings across every level of the payment process, positioning businesses to operate more efficiently in a competitive digital marketplace.