It’s the question we all know well when at a store’s checkout counter.
Cash? Credit? Or Debit?
How we answer that has important ramifications for us as consumers as well as for the stores we are shopping at. Credit card transaction fees can add up quickly, but banknotes – the “cheaper” payment option – are falling out of favor quickly as America moves in a more cashless direction.
A new FinTech trend, pay-by-bank, is quickly changing how we pay for things on a day-to-day basis. And one leader in the pay-by-bank space, Sionic, is building right in the heart of Atlanta.
Sionic is the first to launch real-time pay-by-bank options for merchants in the US. That gives merchants a way to circumvent the 1-3% credit card fees associated with each transaction by allowing for real-time, bank-to-bank transfers at the point of sale.
The technology is something Venmo and Zelle users are already familiar with. Its go-to-market partners are an impressive list of players, including Google Cloud, Visa’s Cybersource, Jack Henry & Associates and MX.
The underlying payment rails is supported by The Clearing House’s RTP network, which brings together 23 of the largest banks for real-time payment options. This helps merchants move away from ACH network’s bank transfers, which have dominated the payments landscape but traditionally take days to process.
Ronald Herman, Sionic’s founder and CEO, said that the pay-by-bank model has benefits both for the merchant and the consumer. It is all about re-allocating funds and control.
“For merchants, if they want consumers to receive incentives for coming in and spending money with them, it should be at their discretion, versus that of [credit card companies] that are extremely expensive for merchants to accept,” Herman told Hypepotamus. “We’re trying to re-engage the merchants because they can say, I know my customer better than AmEx does.”
For consumers, this eliminates the need to download specific apps or rack up store rewards card for each retailer. It also is about helping consumers take control of their spending habits.
“The final perk on the consumer side is with inflation and credit card debt rising, we’re really focusing on getting folks back to sensible spending,” Herman added.
THE CHANGING PAYMENTS LANDSCAPE
The FinTech space is going through a massive shift as preparations are underway for the rollout of FedNow, an instant payment service supported by Federal Reserve Banks. The service will officially go online next summer, The Federal Reserve announced this week.
That will mean the US will soon have two competing payment rails that offer faster services.
While Herman said it will be easier for FedNow to reach ubiquity, he does not see the RTP Network going away anytime soon.
“All these major banks who’ve invested heavily in the RTP network since 2017 aren’t going to just drop off. There is going to be crossover between those two platforms. And I would argue that consumers may initiate a real time payment through a bank that’s part of the RTP network that will end up in a bank account of a merchant who is part of the FedNow program, or vice versa. That cross pollination between those two networks is only good for everybody in the US market. We’re finally starting to catch up with other countries who are way beyond where we are today,” Herman added.
In fact, Sionic will be part of both payment rails.
Sionic’s pay-by-bank product is on top of other FinTech transformations the team has made over the past few years. Pre-pandemic, the Atlanta team rolled out its ULink commerce platform for same-day ACH payments.
That is on top of nearly a decade of building FinTech solutions in the city.
“Over a decade ago, we set out to pioneer the future of mobile payments even before mobile payments were readily accepted or mainstream,” Herman previously told Hypepotamus. “As the ecosystem has changed, it’s been interesting to witness the major rollups with FIS, Fiserv and Global Payments alongside neobank startups and most recently BNPL rollouts in the US market…We have been quietly and steadily building out our new-gen RTP offering and aligning with some pretty big names for our rollout this year. In this ever-changing climate, Sionic has learned to overcome challenges by continually adapting to the market, and Atlanta has been the absolute perfect place for us to grow.”