Are Consumers Showing Interest in Direct Payments?

Alternative payment methods have gained attention as a result of changing card cost structures and large retailer announcements. Major retailers, such as Walmart, have unveiled initiatives to support and incentivize lower-cost payment methods such as account-to-account (A2A) within their app/wallet as a way of reducing payment expense and driving repeat business. Along with a wave of new products that provide non-card payment options, payment strategists must confront the questions of if, when, and how to support these new payment methods. 

Consumer adoption and interest are a mixed bag to date. Javelin Strategy & Research data indicates limited consumer experience with pay-by-bank and similar payment methods and even less interest amongst those who have not used the methods. This data suggests that low-cost faster payments do have applications but are unlikely to displace other payment methods in the near future, especially (but not exclusively) for in-person transactions. 

The potential risks of these methods are as real as the gains. The lower costs of these payment types come at, well, another cost. It’s straightforward to update the expense line item for payment cost to a smaller number and see the bottom line increase. However, soft costs such as customer experience, reputational risk, and refactoring as circumstances change are all just as real as the reduction in the discount rate. Factors such as market segment, relative impact to customer type, as well as regulatory, legislative, and judicial intervention must be part of any “cost” evaluation, particularly at a large scale.

Companies Mentioned: 

AT&T, Federal Reserve, T-Mobile, Target, The Clearing House, Verizon, Walmart, Zelle / Early Warning Systems (EWS)