FIS, a global leader in financial technology, has announced a strategic partnership with Banked, a leading payments provider. The partnership will leverage open banking to create new pay-by-bank solutions that will be targeted at both businesses and consumers. The solutions offer the promise of faster interbank transfers that will lower costs, improve security and a better user experience.
Money transfers between businesses, especially in some sectors, can take longer than they should. International transfers can take between 1-5 days. At times, it almost feels like the cash is put on a plane and taken to its destination. Open banking is intended to resolve these delays. Though at the cost of the interest the bank will collect in profits. As open banking becomes more common in the US and banks must modernise to stay competitive, FIS hopes the new pay-by-bank features will help industries such as insurance, higher education, utilities, governmental agencies and more. The impact will improve cash flow as the time to receive payment reduces.
The open banking promise for A2A payments
The promise of open banking enables financial service providers to gain secure access to banking data to complete digital payments. It enables businesses and consumers to make payments between accounts without having every detail every time. Importantly, information about the destination account is used to verify the transaction in a friendlier way. It enables settlements to be completed faster, more securely and with potentially lower fees.
Seamus Smith, Group President, Global Business to Business Payments, FIS, commented, “Corporations and consumers are clamoring for solutions that move their money easier and faster, and as open banking and fraud prevention mature, FIS is in a unique position to start offering pay-by-bank solutions for both businesses and consumers. Partnering with Banked is a proof point of FIS’ commitment to bring frictionless payments to a wider spectrum of critical industries in a secure, convenient and cost-effective manner and complements the investments we’re making in next-gen payments infrastructure.”
A2A payments are the future
Account to Account (A2A) payments have been around for a long time. However, what changed the market was the advent of open banking. Before that, the easiest way for consumers and even businesses to make payments was by credit card, often through third-party platforms. That method has pros and cons and is not likely to disappear.
Bank transfers were often cumbersome, but digital payments using open banking are changing it. A2A payments generated around $325 billion in eCommerce transaction value in 2022, according to the 2023 FIS Global Payments report. They are projected to grow at 13% CAGR.
Brad Goodall, Co-Founder and CEO of Banked, “Our mission at Banked is to make payments better for everyone, and we are excited to join forces with FIS to make that vision a reality. Together, we are enabling businesses to leverage the power of open banking and real-time payments to offer their customers a superior payment experience.
“FIS takes a highly innovative approach to solving real pain points for their clients. They see the value pay-by-bank solutions can bring for a variety of use cases now and in the future, and we are excited to build out the partnership and bring new payment capabilities to market.”
Last year, FIS was one of the first movers in real-time payments by completing testing and certification for the FedNow Service. With this announcement, it hopes to extend that leadership.
Enterprise Times: What does this mean
The potential in the US is huge. McKinsey recently reported, “In the US, growth rates for instant payments surpassed 60 per cent, albeit off a relatively small base. At this stage of maturity, there remains room for a breakthrough that sparks an even higher US growth rate.” That growth, McKinsey believes, is mainly at the expense of cash and, to a lesser extent, checks. This partnership, therefore, has potential, especially if the solutions launch in time to gain market share.
Banked offers solutions across several use cases include eCommerce, bill payments, collections, donations, payouts, and wallet top-ups. It will be interesting to see what it achieves with FIS and how the solutions are brought to market.
