JP Morgan and MasterCard modernise payments with ‘Pay-by-Bank’

With the way we move our money changing, JP Morgan and MasterCard are stepping in to provide an alternative payment method in “the latest twist on ACH payments”.

Bringing open banking technology into the equation, the two companies are introducing ‘Pay-by-Bank’, an ACH payment that will enable consumers to give permission for their financial data to be shared across platforms to pay directly from their bank account.

The most obvious use case for ‘Pay-by-Bank’ will be for recurring payments, such as rent and utilities, where ACH is the primary medium for payment.

“[Mastercard’s] open banking capabilities will transform the payment experience,” JP Morgan head of payments and commerce solutions Max Neukirchen said.

“Together, we will offer an attractive, simple and secure Pay-by-Bank solution that gives choice to our clients and their customers who use ACH as their payment mechanism.”

Neukirchen this is part of the bank’s vision to “accept any payment, anytime, anywhere”. 

This also falls in line with Mastercard’s changing view on how customers want to control and access their money.

“We realized years ago that the way people think about money and commerce is changing,” Mastercard VP, North America merchants and acceptance Chiro Aikat said.

“They want to pay and get paid how they choose, where they choose and when they choose.” 

Aikat pointed to the ease of user experience and security of data sharing as two key points of innovation for customers.

With open banking, users will verify themselves through their own bank’s authentication process when they choose to ‘Pay-by-Bank’ at checkout.

“The technology behind Pay-by-Bank reduces the likelihood of unauthorized transactions and frees our clients from the need to retain — and the responsibility to securely maintain — consumer banking information,” Neukirchen added.  

‘Pay-by-Bank’ is piloting with a “small number” of US-based billers and merchants this year and is expected to expand next year.

GoCardless co-founder and CEO Hiroki Takeuchi said the new payments solution is further confirmation that “direct bank payments are the way of the future”, noting that last year, more payments in the UK were made on Faster Payment rails than on credit cards.

“Around the world, advancements in open banking have transformed the speed, ease and security of bank payments, putting them on equal — and often better — footing than cards for a variety of use cases,” Takeuchi said.

“The fact that JP Morgan and Mastercard have waded into this space validates what we’ve been doing for over a decade, and it signals that mass adoption is imminent.”