In the dynamic world of business, the trend of businesses expanding their customers’ payment options to include bank-based methods like Automated Clearing House (ACH) and Electronic Funds Transfer (EFT), is gaining momentum. By allowing direct payments from bank accounts and bypassing traditional credit card networks this shift promises enhanced security, convenience, and better financial management for consumers. .
So, is it worthwhile for your business to expand and accept bank-based payments? Before you rush ahead and start building in Automated Clearing House (ACH) and Electronic Funds Transfer (EFT) payment options into your customer journey, here are a few things you should be aware of:
What are Pay-by-Bank services?
Pay-by-Bank, enables consumers to transfer funds directly from their bank accounts. This process can take various forms, but for simplicity’s sake, this method bypasses traditional credit card networks, and is increasingly becoming facilitated by open banking systems. It’s a shift from conventional methods like credit or debit cards, with the goal being to streamline transactions.
Consumer Resistance and Potential
Despite the advantages, research shows that nearly 40% of consumers are hesitant to adopt Pay-by-bank payments, even with incentives. While 84% of users are satisfied with A2A payment platforms, a significant portion abstains due to a lack of understanding. A study by AWS highlights the need for educational campaigns to bridge this knowledge gap. Additionally, generational preferences play a role, with millennials leading in A2A adoption, whereas older generations show less interest. Surprisingly, incentives like cash-back offers or discounts are not enough to sway skeptics, suggesting the need for more than just financial incentives to boost adoption. Read: Payments – Nearly 40% of Consumers Say No to Pay-by-Bank Payments Even With Incentives
Benefits to Customers and Merchants
For customers, benefits include lower costs (when merchants are employing surcharging for credit card transactions), enhanced security, convenience, speed, and better financial control. Merchants, on the other hand, can enjoy reduced transaction fees, lower chargeback risks, access to a broader customer base, faster settlement times, and regulatory compliance. These advantages make a compelling case for businesses to consider bank-based payments as an additional payment option to make available to their customers.
Considerations for Implementation
However, the decision to adopt bank-based payments isn’t straightforward. Factors like the user experience, which may not always rival credit card transactions, the availability and accessibility to all customers, and the dependency on regional technology and infrastructure must be considered.
Weighing the Pros and Cons
While bank-based payments offer several advantages, particularly in terms of cost and risk management for merchants, they also present benefits to consumers in terms of security, convenience, and financial management. However, the extent of these benefits varies depending on individual circumstances and regional factors. Therefore, businesses must carefully evaluate whether expanding to accept bank-based payments aligns with their operational needs and customer expectations.
In conclusion, the decision as to whether to incorporate Pay-by-Bank payments into your business model is a multifaceted one. The growing popularity of bank-based methods with their previously mentioned attendant advantages presents a compelling case. However, the mixed response from consumers, and the varied impact on different demographics, calls for a strategic approach. Balancing the tangible advantages for both customers and merchants against the potential challenges in implementation and customer adoption is crucial.
If you are wondering whether you should add Pay-By-Bank as a payment option for your customers and are looking for guidance, start by contacting our team at Datatel (link to: https://www.datatel-systems.com/Contact.aspx) – we can help facilitate the journey.