New Era of Payments: Pay-by-Bank Solutions

The payments industry is experiencing a significant shift towards enhancing user experience and efficiency, according to PYMNTS. In a recent interview for the series “What’s Next in Payments: Payments Modernization,” Trustly Vice President of Enterprise Growth Ross McFerrin highlighted the key drivers behind this transformation.

«The payments industry is constantly evolving, and when you look at the U.S. in a very card-dominated market, you’re seeing a material shift right now,» McFerrin said. He attributed this change to open banking, shifting consumer preferences, and advancements in technology, including artificial intelligence (AI).

Open banking, while not new globally, is poised for regulatory adoption in the U.S., potentially ushering in a new era. This shift will require banks to provide secure access to their data to third-party service providers, enhancing integrated and user-friendly financial services. As regulations mature and faster payment systems become prevalent, seamless, real-time payment solutions are expected to gain broader adoption, creating tangible benefits for businesses and consumers.

Consumer demand for more flexible and efficient payment methods is also driving change. McFerrin noted that pay-by-bank solutions, which allow direct payments from bank accounts without intermediary steps, are increasingly popular. Trustly has been processing these account-to-account (A2A) transactions at scale, leveraging automated clearing house (ACH) systems to manage risks and improve transaction speed.

Technological advancements, including AI and blockchain, along with faster payment systems like the FedNow® Service and The Clearing House’s RTP® network, are further reshaping the payments landscape. McFerrin stated, “We expect that core banking systems are going to need to undergo a very significant evolution in order to remain relevant and competitive.” Collaborations between FinTech companies and traditional financial institutions are essential for streamlining the deployment of new payment solutions, reducing the need for extensive technical overhauls.

Modern payment systems are also using data to offer personalized experiences. By analyzing transaction data, companies can provide tailored recommendations and flexible payment options. AI and machine learning play a crucial role in managing risks and enhancing transaction security through real-time analysis and fraud detection.

Reducing transaction costs is another priority. High interchange fees associated with card payments are a burden that pay-by-bank solutions aim to alleviate, providing a cost-effective alternative.

Looking ahead, McFerrin emphasized the importance of user-centric solutions that prioritize speed, security, and cost-effectiveness. «By focusing on user-centric solutions that prioritize speed, security and cost-effectiveness, industry leaders can meet the evolving needs of consumers and businesses alike,» he concluded.

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