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AWS and Plaid Advance the Business Case for Open Banking and Pay by Bank
- US financial companies now have the opportunity to leverage Open Banking and Pay by Bank following the Consumer Financial Protection Bureau's (CFPB) release of its final Rule 1033 draft on Oct 22. Plaid and AWS are among companies pushing the envelope in Open Banking, building solutions from bill payment modernisation to merchant-driven cashback. The user experience is central to pay-by-bank adoption, with consumers able to authenticate their account information and make payments over biometrically-driven, digitised services.
- Pay-by-bank solutions are making headway in specific use cases, such as account-to-account transfers, but broader adoption will require clearer value demonstration for consumers and merchants. Merchants are already seeking out turnkey solutions to integrate pay by bank into existing checkout flows.
- For financial services to move to successfully implement pay-by-bank solutions, the underlying technology systems have to evolve. The ability to handle real-time expectations in a scalable fashion, including instant fund transfers while preventing fraud and ensuring transparency, will be imperative to success.
- The finalized Rule 1033 draft represents a major step in advancing Open Banking and Pay by Bank solutions in the U.S., with the 60 days before implementation an opportunity for banks and fintechs to innovate and align their systems to meet new compliance requirements. Stable safeguards and fraud liability for consumers and their data protection are fundamental to their adoption.
- Incentives, beyond merchant-driven incentives and cashback for younger consumers to try pay-by-bank for eCommerce, are key to driving adoption while building trust and familiarity with the system. The move must be seen as more than a compliance obligation for financial institutions.
- The UK's 2017 introduction of Open Banking prompted the advent of more innovative, customer-data driven solutions and since then the evolution of seamless payment solutions like Pay for Bank. Both AWS and Plaid have been at the forefront of developing strategies to advance the case for more innovative Open Banking and Pay by Bank solutions.
- Consumer expectations and behaviours surrounding financial service delivery are expected to change considerably in the US following the implementation of the finalized Rule 1033 draft. The ruling is expected to facilitate value-based Open Banking and Pay by Bank solutions, rewriting the financial sector's delivery narrative.
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