The head of payments at Plaid recently spoke about the growth and opportunities that are being presented through the pay-by-bank or ACH channel, especially in areas like bill payments.
ACH volumes have been growing “like crazy” in other areas of the world, like Europe and Asia, noted Rahul Hampole in the report. Here in the United States, ACH volume sits at about $1 trillion, but that is poised to continue growing.
The important part for companies and merchants will be making consumers comfortable with the process and the benefits of ACH over a card-based transaction. That will likely involve discounts for consumers who pay via ACH or premiums for those opting for card-based transactions. Many of us are already seeing merchants tack on additional fees to cover the cost of card-based transactions.
Money can be moved faster through ACH, and for people who are working in the gig economy, getting paid faster is huge. With card-based transactions, funds can take days to show up in a consumer’s account.
Plaid is seeing more merchants and financial institutions using pay-by-bank and are treating the growth of this channel much the same as they treated the growth of card-based transactions that started a couple of decades ago. Merchants also prefer ACH because the fees are lower than for card-based transactions, Hampole said.
Ultimately, the process for an ACH transaction needs to be as simple as tapping or swiping a card for it to gain traction and be successful.
“Businesses will be pushing more bank-linked payments,” he said, “where it makes sense for them from both a pricing and margin perspective — but also ease of use. In five or 10 years, you’re going to see habits form around these [pay-by-bank] situations … Consumers are open to it, as long as the ingredients are there, and the use cases will mushroom over time.”
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