UK fintech Banked has teamed up with Bank of America (BofA) to deliver a ‘pay by bank’ real-time online account-to-account solution. TMI finds out more from Brad Goodall, CEO, Banked, and Ad van der Poel, Co-Head of Product Management for GTS EMEA, BofA.
Open banking has lived up to its name, delivering a number of new payments options over the years. Today, the notion that customers of e-commerce companies can pay directly from their bank account, bypassing the normal card channel, is one more step towards intended openness. But account-to-account (A2A) payments should appeal to B2B players too.
With Amazon in the UK having only recently resolved its dispute with Visa regarding fees, the A2A concept could easily play a role in meeting corporate demand for lower-cost payments options. Yet cost is only part of the story, notes van der Poel.
With online checkout using A2A being “simpler, faster and more secure” for both sides of a sale, he believes that the benefits for processes around functions including account collections, reconciliations, working capital, and credit management should prove compelling for corporate finance functions.
The BofA and Banked partnership has created the pay by bank solution, which is currently only available for use in the UK. Subsequent roll-outs will occur in other countries and regions in the near future when open banking is made available. As a bank/fintech collaboration, the solution has its roots in the rapid emergence of mobile banking, and the explosion of innovation in the checkout process for merchants and e-commerce platforms, explains Goodall.
“There’s a recognition of the opportunity for merchants to offer consumers alternatives to the largely card-driven payment model, and banks are leveraging their mobile banking apps to actively insert themselves in the process,” he explains. Banked has used this perspective to drive what he sees as “the future of checkouts”.
Where Banked delivers the creativity and agility around bank connectivity and the consumer experience, Goodall says that BofA brings the scale and necessary cash management functionality to meet corporate needs. The relationship is necessarily reciprocal. E-commerce use cases are essential to find, but the back office needs, including those of treasury, are equally important, he says. “Without one you cannot get to the other.”
Between the two partners, process alignment has clearly been achieved through close collaboration. Their effort ensures key components, such as security protocols, are in place. The joint endeavour has not only enabled secure integration of pay by bank functionality with corporate clients’ pay pages, but also facilitated connection of its data, via the bank, to the corporate’s own back-office systems, enabling real-time confirmations, fast collections, reconciliations, and cash allocation.
The platform is offered as a hosted or embedded delivery option, explains Goodall. This means respectively that corporate users can deploy a white-labelled version, or take the opportunity for an inhouse deep dive, leveraging a more customised implementation. In both cases, he explains that Banked is aiming for rapid platform deployment, testing and optimisation. For the embedded option, it provides merchants with a software developer portal to aid integration of the platform, and its transactional data, into the corporate environment. A software developer kit is also offered, supporting different connectivity options, including API, that can open up functionality such as near real-time alerts when a customer account is underfunded.
Real time functionality is a key element of pay by bank. It leverages instant payments mechanisms, such as the UK’s Faster Payments Service (FPS), to provide the seller with immediate confirmation that its buyer has authorised a payment. The connectivity of the solution with BofA implicitly confirms the availability of customer funds, and those funds arrive in the seller’s account as quickly as the operating infrastructure will allow.
In the UK, where the platform is live, the FPS ensures almost immediate receipt of funds. Once the roll-out reaches jurisdictions without this capability, payments receipt may take longer, warns van der Poel. However, in this situation, he adds that even for cross-border transactions, a real-time payment authorisation message guarantees that the money is in transit, enabling the supplier to safely progress the order even before funds hit its account.
This has a notably positive outcome in the B2B space. As well as enabling suppliers that do not accept card payments to build new customer relationships, it ensures all businesses are able to expedite their reconciliation processes, even at scale. The Banked A2A model also provides greater visibility over working capital, with all the advantages this brings. And because incoming funds can be allocated quicker, it can also free up customer credit lines, potentially boosting sales. What’s more, process connectivity within the corporate means funds can be identified quicker, streamlining the refund process, creating an obvious customer benefit.
The wider geographical roll-out of pay by bank is already in the pipeline, says van der Poel. “Because it leverages open banking, we will initially focus on countries and regions where this is starting to grow.” The Eurozone, Brazil and possibly the US are all on the radar.
Further possibilities are being discussed. “As this solution is API-based and easy to implement, we feel it can be truly embedded into a corporate client’s payment processes,” notes van der Poel. In B2B, embedding payments enables the process to be triggered at the touch of a single button, offering faster checkouts and quicker settlement. “By integrating A2A payments deeper within the corporate supply chain, rather than being a process at the end of it, this opens up a host of new use cases, some of which we haven’t even thought of yet!”
BofA and Banked are now working with corporates to explore the most impactful B2C and B2B payment use cases, but the prospect of A2A-derived payments speed, visibility and integration is one which treasury would be advised to explore, at least as an option.