In the fast-moving world of digital finance, innovations are constantly changing the way we manage our money. One of these developments is pay by bank transfer, a payment method that allows consumers to make payments directly from their bank account – without the need for a debit or credit card.
To pay with your bank account, follow these steps:
- When paying, select the option “pay by bank”.
- Select your bank from a list or enter its name.
- You will be redirected to your bank’s website.
- Log in with your online banking login details.
- Authorize the payment.
- Confirm the transaction.
- Optionally save your bank details for future use.
(Note: Steps may vary depending on your bank and payment provider.)
Direct authentication with the consumer’s bank ensures bank-grade security: a password, fingerprint scan, facial recognition, one-time password, or however the consumer has secured it. The consumer logs into their account the same way they check their account balance. The retailer or biller has no access to login credentials; login occurs on the bank’s website or mobile app. Since payment is made directly from the consumer’s bank account, there is no need to enter or store debit or credit card details or personal information.
share sensitive data online with third parties.
While direct bank payments are nothing new in the United States, recent technological advances, the introduction of real-time payment systems, and the development of open banking infrastructure represent a significant development. Open banking allows consumers to securely share their account information with third parties such as fintech companies and other service providers without the need for screen scraping.
Open banking in the US sets standards for the exchange of consumer financial data through application programming interfaces (APIs). These APIs enable the secure transmission of payment instructions and authorizations between banks and other financial institutions. Security is ensured through a combination of industry standards such as OAuth 2.0 for authorization, proposed regulatory rules under Section 1033 of the Dodd-Frank Act, and best practices in cybersecurity. These measures protect transactions and consumer data from fraud and unauthorized access and ensure the integrity and confidentiality of financial transactions.
Such technological innovations make Pay by Bank an emerging and increasingly relevant payment method in the US market that will revolutionize the way we conduct financial transactions, and its use is expected to accelerate in 2024. in the USA.
For consumers, paying by bank transfer offers security, transparency and convenience. For merchants, paying by bank transfer means lower transaction fees by bypassing traditional card networks and payment processors and reducing the number of middlemen. Sometimes these savings are passed on to consumers in the form of discounts or rewards to incentivize them to use this new payment method. When the transaction is processed in real time, merchants get instant access to the funds, improving cash flow. It improves operational efficiency, eliminates chargebacks and helps reduce the time and resources spent on reconciliation and processing.
To ensure the security of authentication for bank payments, companies must strictly adhere to security protocols. OAuth 2.0 can be exploited if redirect URLs are not properly validated. Proper handling and expiration of access tokens are critical to prevent abuse. Regular security audits, updates, and educating users about phishing are essential to robust security.
By adhering to these measures, we can ensure the continued security and trustworthiness of financial transactions in the era of open banking.
Have you used alternative payment methods? What did you like or what did you have concerns about? We would love to hear your thoughts on the topic of paying by bank. Join the discussion. Contact me at [email protected].
