Cards may dominate checkout, but there’s another payment method gaining momentum — one that consumers already use every day.
Pay-by-bank allows customers to authorize a payment directly from their bank account, bypassing card networks entirely. No card numbers. No interchange fees. No manual bank transfers. Just a secure, authenticated account-to-account payment.
For consumers, it’s simple. For businesses, it’s significantly more cost-effective. And in categories like rent, utilities, insurance, and subscriptions, it’s quickly becoming essential.
What is Pay-by-bank?
Pay-by-bank enables customers to pay directly from their bank account using secure authentication, often through ACH rails. Instead of entering card details, customers can select “Pay by Bank” at checkout or on bill pay screens. Behind the scenes, embedded finance authenticates the user and the payment with the consumer’s financial institution. Once approved, funds the move directly from their account to the business.
The experience is increasingly seamless, and in many cases, faster and more intuitive than manually entering card details. It also has the benefit of persistence, so once the bank credentials are securely stored, the next payment follows the happy path to success.
Consumers want simplicity and control
For many purchases, especially recurring or high-value ones, consumers prefer using their bank account. Here are a few use cases that reduce friction for consumers, and can also be designated by the business as the preferred (or only) payment method.
Rent
Rent is often the single largest monthly expense. Paying by bank avoids card limits, prevents interest charges, and reduces the need for manual checks or money orders. Pay-by-bank is often mandated in the lease agreement, reducing payment acceptance issues throughout the rental period.
Property owners or managers may rely on third-party vendors to provide this critical function, but doing so can mean missing an opportunity to own the payment experience, reduce fees, and strengthen the relationship with residents.
Utilities
Electricity, water, gas, and internet bills are predictable, recurring payments. Linking a bank account once allows customers to set up autopay and avoid late fees. Pay-by-bank ensures uninterrupted services for these critical utilities, removing the need to update card numbers or expiration dates.
Insurance
Premiums are frequently paid monthly or quarterly. Pay-by-bank removes friction and avoids card declines due to expiration or limits. This is another example of always-on coverage, where consumers are loath to risk being uncovered for any amount of time, especially when due to payment issues.
Healthcare bills
Medical payments can be large and unexpected. Paying directly from a bank account provides transparency and immediate confirmation. And many healthcare providers offer discounts for paying by cash, check, or direct bank transfer (ACH) rather than credit card, as it helps them avoid high merchant processing fees.
Subscriptions
Streaming services, memberships, and mobile apps benefit from direct account debits that reduce involuntary churn caused by expired cards.
For consumers, pay-by-bank offers:
- Fewer steps at checkout
- No need to enter or update card details
- Better cash management
- Reduced risk of declined payments
Lower cost, less friction for businesses
Card payments are convenient — but they’re expensive. Pay-by-bank can significantly reduce processing costs by avoiding card interchange fees. For businesses operating on thin margins or processing high transaction volumes, the savings are meaningful.
Some of these businesses still accept checks as payment. This brings a host of issues, including fraud, human error, and the cost of manual check processing.
Lower payment costs
ACH transactions typically cost a fraction of card interchange fees, especially for large-ticket payments like rent or tuition.
Reduced payment failures
Expired cards and insufficient credit limits are common causes of failed payments. Direct bank authorization reduces those disruptions.
Fewer manual processes
Paper checks, manual reconciliations, and back-office exception handling consume time and resources. Automated bank payments reduce administrative overhead.
Improved cash flow predictability
Recurring pay-by-bank setups provide greater visibility into incoming funds, improving forecasting and liquidity management.
Where Pay-by-bank makes the most sense
Pay-by-bank is particularly powerful in:
- Property management and rent collection
- Utilities and telecom
- Insurance and lending
- Healthcare providers
- Education and tuition payments
Any business collecting recurring or high-value payments should consider offering it as an option.
Dare we say it — it’s a win-win
Consumers want payments to be effortless. Businesses want them to be affordable and automated. Pay-by-bank delivers both. By offering it alongside traditional card options, companies can improve checkout, reduce costs, and create a smoother experience for everyone involved.
