Payment processor Fiserv is lining up clients that want to add a pay-by-bank option for consumer payments.
The company has “a number of clients in the pipeline and in the integration process” that are adding that option for consumer payments, Fiserv VP Charles Williams said in an interview earlier this month.
This month’s FedNow launch is driving more large merchant interest in such payment options, Williams said. Additionally, Brookfield, Wisconsin-based Fiserv announced during its first-quarter earnings call in April that it would provide mega-retailer Walmart with pay-by-bank capabilities.
Merchant frustration over credit card interchange fees, too, has led more to explore the alternative payment method.
Pay-by-bank has become “part of the conversation with every enterprise client that we have,” said Williams, who’s also the company’s general manager of alternative payments.
“Every merchant comes to the table and says, ‘I want to lower my cost of payment acceptance,’” Williams said. Being able to put those savings into programs for their customers is also of interest to merchants, he added.
The launch of the Federal Reserve’s FedNow instant payments system has heightened interest in pay-by-bank options. Grocery chain Kroger has also expressed interest in tapping real-time payments.
Most, if not all, of the large merchants Fiserv works with are considering how pay-by-bank could benefit their business, Williams noted.
Fuel company Sunoco is another Fiserv merchant client tapping pay-by-bank capabilities through Carat, Fiserv’s large merchant operating system. Williams declined to name other merchant clients mulling such a move.
Other companies using Carat include fuel company ExxonMobil, insurance provider State Farm, tech giant Microsoft and athletic wear brand Adidas, a Fiserv spokesperson said.
The pay-by-bank agreement Fiserv signed with Walmart includes traditional automated clearing house processing and incorporates Fiserv’s gateway to real-time rails and instant payments capabilities. Fiserv was among the early adopters of FedNow, which launched July 20.
A Fiserv spokesperson declined to comment further on the details of the agreement with Walmart. For consumers, Williams noted the pay-by-bank experience at the retailer will be similar to that of inputting card details.
In pay-by-bank situations, Fiserv is powering an open banking platform, where consumers log into their bank account, as well as the payment processing behind the scenes, he said.
With pay-by-bank functionality, “we can make a decision when a payment happens: should this be ACH or should this be a real-time payment?” Williams said. “So we’re building that logic out and those business rules out. Not every bank’s going to support real-time payments, not every customer may opt in for real-time payments.”
Williams expects broad real-time payments adoption in a consumer-to-merchant setting won’t come right away, due to the more involved nature of a request for payment. Banks have to implement that capability, and merchants have to build out that function in their apps, he said.
“Receiving the funds is one thing, but then building out the request for payment is another,” Williams said. “It’s still going to take some time to get some real scale.”
