By Patti Murphy
Real-time payments are coming to a POS near you, real soon. Sionic, an Atlanta-based payments company, recently unveiled its new POS payments service, Pay-By-Bank. As the name implies, the service supports bank-to-bank digital payments from consumer to merchant accounts, initiated at the POS, or even in a car. There's also an option for merchants to incent customers to use the service, including discounts. Think cash discounts.
"This is a good step forward in helping merchants combat inflation," Ron Herman, founder and CEO at Sionic, said in a statement. "From local businesses to global enterprises, merchants continue to be plagued by credit card fees." Consumers, too, have "amassed an abundance of late fees" with card issuers, he noted. "Bringing instant digital bank payments to commerce provides a new way to more equitably reallocate value back to both the merchants and consumers. The Great Reallocation of digital payments is here," he said.
Sionic is not trying to squeeze banks or other legacy players out of the POS payments market, Herman explained in an interview. "This is inclusive," he said. "Anyone selling [merchant services] can sell this."
The company is working with leading acquirer Shift4 and will work with additional payments companies "down the road," Herman said. Other Sionic partners include Jack Henry & Associates, a technology services company supporting banks and credit unions, Visa's CyberSource, and Google (which is providing cloud support). Sionic also has a partnership with General Motors to support in-car payments, he noted
Pay-by-Bank transactions clear through RTP, the real-time payments network built by The Clearing House, a payments company owned by the nation's largest commercial banks. RTP reported it handled 36.8 million transactions valued at $15.7 billion in the first quarter of 2022. Herman told me Pay-by-Bank will be going live this summer with several small Atlanta-area merchants—a test-run of sorts. Sionic's Pay-by-Car service is slated to launch this fall, he said.
Bank-to-bank payments are the latest iteration of person-to-person payments. Consumer usage of P2P mobile apps, like Zelle and PayPal, has been growing in recent years, primarily as a replacement for cash and checks.
The Federal Reserve, which keeps tabs on consumer spending habits, reported the share of monthly P2P payments made using mobile apps nearly doubled from 15 percent to 29 percent between 2020 and 2021. Cash usage, on the other hand, fell from 57 percent of P2P transactions to 49 percent. Checks accounted for 9 percent of monthly P2P payments in 2021, down from 13 percent in 2020.
A recent survey by LendingTree found 84 percent of consumers have used a mobile P2P payment app. The number rises to 91 percent for both Gen Z (18 to 25-year-olds) and millennials (26 to 41-year-olds).
"P2P is effectively replacing cash and check payment options," said Jordan Hirschfield, research director at Mercator Advisory Group.
Among merchants recently surveyed by The Strawhecker Group and the Electronic Transactions Association, 82 percent reported accepting at least one digital P2P payment option. Ninety-three percent of those merchants plan to continue accepting P2P options.
"More and more—especially among newer establishments and gig workers—merchants are responding to consumer demand by allowing them to pay through P2P digital options," said Jared Drieling, senior director of merchant intelligence and insights at TSG.
Reasons merchants gave for accepting P2P payments included ease of use and a way to appeal to younger consumers. Complaints included unexplained holds and other delays, and high fees. Delays are likely due to the fact that when money is exchanged through a P2P network like Venmo it goes into the recipient's Venmo account, not their bank account. Services like Sionic eliminate the need for such holding accounts and make funds available to merchants nearly instantaneously.
Sionic appears to be the first company to introduce a bank-to-bank payment option for merchant checkouts, though others can be expected to follow. Don't expect merchants to 86 card acceptance, though, as Pay-by-Bank will become just one of a plethora of POS payment options. Perhaps most importantly, banks, ISOs and MLSs can create new revenue streams by offering a pay-by-bank POS solution.
Patti Murphy is senior editor at The Green Sheet and self-described payments maven of the fourth estate. Follow her on Twitter @GS_PayMaven.
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