Pay by Bank: Can Account-to-Account Payments Break the Card Rails?

For the first time in decades, the United States has payment rails that move money bank-to-bank in seconds, around the clock, for pennies — a direct architectural alternative to the card networks and the roughly $119 billion a year merchants pay to use them. The technology now exists. The question is whether economics, habit, and rewards will let it matter. This is an honest assessment of pay-by-bank's real prospects.

The core thesis

Every so often, payments produces a genuine architectural alternative rather than a new layer on old rails. Pay by bank — account-to-account (A2A) payment over instant rails — is one: money moving directly from the customer's bank account to the merchant's, no card network in between, settling in seconds with finality. The infrastructure has arrived. The Clearing House's RTP network and the Federal Reserve's FedNow Service now blanket most of the banking system, and the cost differential against cards is enormous.

Our thesis is deliberately two-sided. The capability case for A2A is now proven — the rails work, the reach is real, and the merchant savings are compelling. But the adoption case runs into the most successful loyalty machine in financial history: card rewards, funded by the very interchange A2A eliminates. The result will not be a revolution at the retail checkout but a steady conquest of the segments where cards' advantages don't apply — bill pay, payouts, B2B, and account funding — while consumer checkout remains the card networks' fortress until someone solves the rewards problem. Watching where that line moves is watching the future of US payments.

The rails are built and the savings are real. What stands between pay-by-bank and the checkout counter isn't technology — it's two percent cash back.

What pay by bank is

A pay-by-bank transaction moves funds directly between bank accounts: the customer authorizes a payment from their account — typically through their banking app or credentials — and money travels to the merchant's account without touching Visa, Mastercard, or any card network. In the US this can run over legacy ACH (cheap but slow, with settlement delays and reversibility) or, increasingly, over the new instant rails, where payments clear and settle irrevocably in seconds, any hour of any day.

Two supporting technologies make this practical at scale. Request for Payment (RfP) lets a merchant or biller send a payment request the customer approves in their banking app — the "pull-equivalent" in systems that, for fraud reasons, only allow credit-push transfers. And open banking connectivity supplies the account verification and authorization layer that makes linking a bank account as smooth as entering a card — which is why the fight over financial data access we analyze in the battle for the data layer is inseparable from A2A's prospects.

The rails: FedNow and RTP

The two rails are complements more than rivals — most institutions are advised to receive on both — and together their reach is now substantial: RTP connectivity covers institutions holding the large majority of US demand deposit accounts, and FedNow's participant count has climbed past a thousand institutions, with the Fed's imprimatur drawing in community banks and credit unions the private network hadn't reached. Growth curves on both point steeply upward: RTP's annual payment value jumped 94% in a recent year to $246 billion, while FedNow went from processing $13 million in its first full quarter to over $20 billion a year later. Those are still rounding errors against total US payments — but the trajectory, and the redundancy of two nationwide instant rails, means the infrastructure question is settled.

The merchant economics

For merchants, the case is arithmetic. Card acceptance costs roughly 2–3% of each sale — the interchange, assessments, and markup we dissect in the economics of interchange — plus the operational drag of chargebacks and settlement delay. An instant A2A payment costs a small flat fee, settles immediately (transforming cash flow), and is final — no chargeback mechanism exists on these rails. On any meaningful volume, shifting even a fraction of payments from cards to bank rails is a direct, recurring margin gain. This is why merchant enthusiasm for pay-by-bank is not speculative: for large-ticket and repeat-billing use cases, the savings are simply too large to ignore.

Finality, however, cuts both ways — which is the honest caveat. The absence of chargebacks is a merchant benefit and a consumer cost: the dispute rights and fraud protections that make consumers comfortable paying by card don't automatically exist on push-payment rails, and globally, instant-payment adoption has been accompanied by a rise in authorized-push-payment fraud and scams. Any serious A2A checkout play must rebuild consumer protection in software — and until it does, cautious consumers have a rational reason to keep reaching for the card.

The rewards problem

Here is the fortress wall. American consumers don't pay with credit cards despite the system's cost — they pay with them because of it: interchange funds the points, miles, and cash back that make every card swipe privately rewarding. A consumer offered "pay by bank" at checkout is being asked to give up a ~2% rebate, chargeback rights, and a familiar habit in exchange for… the merchant's cost savings. As we argued in our interchange analysis, this alignment of issuers and cardholders against merchants is precisely why swipe fees have survived twenty years of assault — and it applies with full force to A2A adoption. Banks themselves feel the tension: instant rails are cheaper for everyone, but several of their revenue lines — wires, card interchange — are what "cheaper" cannibalizes.

The implication is strategic: A2A wins US checkout only where someone shares the savings — merchant-funded discounts or loyalty for bank payments — or where cards were never entrenched. Which is exactly what the international evidence shows.

The Pix lesson

Brazil's Pix is the proof that A2A can conquer a payments market — and a map of the conditions required. Launched by the central bank, Pix offered dramatic improvements over the incumbents on every axis — conversion, cost, speed — in a market where card penetration and rewards culture were far weaker than America's, and adoption exploded: it has been projected to account for around 40% of Brazilian online shopping. More than 70 countries had national instant-payment rails before the US; in several, A2A is the default way money moves.

The lesson is double-edged. It proves the ceiling is real: given the right conditions, bank rails can beat card rails at consumer scale. But it also clarifies the US difference: here, the incumbent isn't cash or clunky transfers — it's a rewards-laden card in every wallet, backed by strong protections, in the world's most fragmented banking system (thousands of institutions that all need connecting). Cost advantages alone did not move US merchants' customers; the whole experience — incentives, protection, ubiquity — has to compete. That is a years-long build, not a switch-flip.

Where A2A wins first

• Bill pay and recurring payments. No rewards to forgo (many billers surcharge cards anyway), RfP fits perfectly, and finality suits the use case.
• Disbursements and payouts. Insurance claims, marketplace and gig-worker payouts, earned-wage access, refunds — instant delivery is the product, and consumers love receiving money in seconds.
• Account funding and transfers. Brokerage and wallet funding, where speed and finality beat any card benefit.
• B2B payments. Rich ISO 20022 remittance data enables automatic reconciliation, RTP's $10 million limit opens corporate flows, and no CFO mourns lost credit-card points.
• High-ticket consumer purchases. Where a 2–3% card fee is real money and merchants can fund an explicit discount for bank payment.

Notice what unites these: they're the segments where cards' two moats — rewards and dispute rights — matter least. Everyday retail checkout, where both moats are widest, comes last.

The realistic outlook

The measured forecast: instant A2A payment volume continues compounding rapidly off a small base — industry projections have instant-payment value growing several-fold through 2030 — with adoption concentrating in the beachheads above while consumer checkout share shifts slowly, led by billers and large-ticket merchants sharing savings. The card networks are not standing still; they are building their own fast-payment capabilities and will defend checkout with the rewards engine that has always defended it. The wild card is policy and the open-banking data fight: cheap, reliable account connectivity is A2A's oxygen, and whoever controls and prices that layer shapes the race.

For merchants and payment strategists, the practical posture is optionality: keep card acceptance sharp and cheap — the mechanics in our fee guide apply regardless — while building the capacity to accept and incentivize bank payments where the economics favor them. The rails have finally been laid. In payments, though, rails are necessary and never sufficient: the contest is now over incentives, protection, and habit — and that contest will define the next decade of how America pays.

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This report is for general information only and does not constitute financial, legal, or investment advice. Network statistics, limits, and participation figures are drawn from publicly reported sources and change over time.