Nearly 40% of Consumers Use Pay by Bank for Retail Purchases

Account-to-account (A2A) payments typically occur between individuals, when one consumer transfers money from their bank account to another person’s or when they transfer money between two owned bank accounts.

Driven by the growing adoption of open banking, A2A payments — also known as pay by bank transactions — are also becoming a common payment method, whether for the purchase of products and services or bill payments.  According to PYMNTS Intelligence data, nearly 21% of consumers did at least one A2A payment for online retail purchases in the last three months, while almost 18% used pay by bank in-store retail shopping. Both shopping channels, online and in-store combined, made up nearly 39% of consumers using A2A payments for retail purchases, with a similar portion of consumers using it for grocery items.

These are some of the insights drawn from “Tracking the Digital Payments Takeover: Consumer Familiarity Controls Account-to-Account Payment Growth”, a PYMNTS Intelligence and Amazon Web Services research study that examines the appeal of A2A payments in specific scenarios, such as when making purchases, settling accounts or paying bills. Excluding me-to-me and peer-to-peer payments, which are basically transfers among users’ bank accounts, the study reports that grocery items top the use of account-to-account (A2A) payments for consumer good products purchases.

Pay-by-bank acceptance is crucial in prompting consumers to consider new payment methods. According to the study, PayPal is the most used platform for A2A payments across generations, with roughly 42% of U.S. consumers using it. Venmo and Cash App are behind, with 30% of consumers turning to these options for A2A payments.

To keep on expanding these payment rails, early in October, JPMorgan Chase went live with its Mastercard-powered Pay-by-Bank tool. Combining Mastercard’s open banking technology and J.P. Morgan Payments’ ACH capabilities enables merchants to offer customers the ability to pay directly from their bank accounts.

The convenience and ease of these platforms are particularly appealing not only for bank account transfers but also for goods and services purchases. The big obstacle to wider adoption is, however, more educational than technological. According to the PYMNTS research, more than one-third of consumers do not know how A2A payments work. Awareness campaigns coupled with incentives such as discounts, rewards or exclusive offers could be a potent combination to drive adoption across generations. For the merchant side, the incentives are to reduce the cost of transactions as A2A bypass interchange fees.

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