Finance

Visa to launch pay-by-bank payments, an alternative to credit cards

Published

8 months ago

September 5, 2024

Nurphoto | Nurphoto | Getty Images

Visa said it plans to launch a dedicated service for bank transfers, skipping credit cards and the traditional direct debit process.

Visa, which alongside Mastercard is one of the world’s largest card networks, said Thursday it plans to launch a dedicated service for account-to-account (A2A) payments in Europe next year.

Users will be able set up direct debits — transactions that take funds directly from your bank account — on merchants’ e-commerce stores with just a few clicks.

Visa said consumers will be able to monitor these payments more easily and raise any issues by clicking a button in their banking app, giving them a similar level of protection to when they use their cards.

The service should help people deal with problems like unauthorized auto-renewals of subscriptions, by making it easier for people to reverse direct debit transactions and get their money back, Visa said. It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food boxes, Visa added, but this is planned for the future.

The product will initially launch in the U.K. in early 2025, with subsequent releases in the Nordic region and elsewhere in Europe later in 2025.

Direct debit headaches

The problem currently is that when a consumer sets up a payment for things like utility bills or childcare, they need to fill in a direct debit form.

But this offers consumers little control, as they have to share their bank details and personal information, which isn’t secure, and have limited control over the payment amount.

The open banking movement is inspiring consumers to ask who owns their banking data

Static direct debits, for example, require advance notice of any changes to the amount taken, meaning you have to either cancel the direct debit and set up a new one or carry out a one-off transfer.

With Visa A2A, consumers will be able to set up variable recurring payments (VRP), a new type of payment that allows people to make and manage recurring payments of varying amounts.

“We want to bring pay-by-bank methods into the 21st century and give consumers choice, peace of mind and a digital experience they know and love,” Mandy Lamb, Visa’s managing director for the U.K. and Ireland, said in a statement Thursday.

“That’s why we are collaborating with UK banks and open banking players, bringing our technology and years of experience in the payments card market to create an open system for A2A payments to thrive.”

Visa’s A2A product relies on a technology called open banking, which requires lenders to provide third-party fintechs with access to consumer banking data.

Open banking has gained popularity over the years, especially in Europe, thanks to regulatory reforms to the banking system.

The technology has enabled new payment services that can link directly to consumers’ bank accounts and authorize payments on their behalf — provided they’ve got permission.

In 2021, Visa acquired Tink, an open banking service, for 1.8 billion euros ($2 billion). The deal came on the heels of an abandoned bid from Visa to buy competing open banking firm Plaid.

Visa’s buyout of Tink was viewed as a way for it to get ahead of the threat from emerging fintechs building products that allow consumers — and merchants — to avoid paying its card transaction fees.

Merchants have long bemoaned Visa and Mastercard’s credit and debit card fees, accusing the companies of inflating so-called interchange fees and barring them from directing people to cheaper alternatives.

In March, the two companies reached a historic $30 billion settlement to reduce their interchange fees — which are taken out of a merchant’s bank account when a shopper uses their card to pay for something.

Visa didn’t share details on how it would monetize its A2A service. By giving merchants the option to bypass cards for payments, there’s a risk that Visa could potentially cannibalize its own card business.

For its part, Visa told CNBC it is and always has been focused on enabling the best ways for people to pay and get paid, whether that’s through a card or non-card transaction.

Finance

More Americans buy groceries with buy now, pay later loans

Published

4 hours ago

April 26, 2025

Business Finance News

People shop for produce at a Walmart in Rosemead, California, on April 11, 2025.

Frederic J. Brown | Afp | Getty Images

A growing number of Americans are using buy now, pay later loans to buy groceries, and more people are paying those bills late, according to new Lending Tree data released Friday.

The figures are the latest indicator that some consumers are cracking under the pressure of an uncertain economy and are having trouble affording essentials such as groceries as they contend with persistent inflation, high interest rates and concerns around tariffs.

In a survey conducted April 2-3 of 2,000 U.S. consumers ages 18 to 79, around half reported having used buy now, pay later services. Of those consumers, 25% of respondents said they were using BNPL loans to buy groceries, up from 14% in 2024 and 21% in 2023, the firm said.

Meanwhile, 41% of respondents said they made a late payment on a BNPL loan in the past year, up from 34% in the year prior, the survey found.

Lending Tree’s chief consumer finance analyst, Matt Schulz, said that of those respondents who said they paid a BNPL bill late, most said it was by no more than a week or so.

“A lot of people are struggling and looking for ways to extend their budget,” Schulz said. “Inflation is still a problem. Interest rates are still really high. There’s a lot of uncertainty around tariffs and other economic issues, and it’s all going to add up to a lot of people looking for ways to extend their budget however they can.”

“For an awful lot of people, that’s going to mean leaning on buy now, pay later loans, for better or for worse,” he said.

He stopped short of calling the results a recession indicator but said conditions are expected to decline further before they get better.

“I do think it’s going to get worse, at least in the short term,” said Schulz. “I don’t know that there’s a whole lot of reason to expect these numbers to get better in the near term.”

The loans, which allow consumers to split up purchases into several smaller payments, are a popular alternative to credit cards because they often don’t charge interest. But consumers can see high fees if they pay late, and they can run into problems if they stack up multiple loans. In Lending Tree’s survey, 60% of BNPL users said they’ve had multiple loans at once, with nearly a fourth saying they have held three or more at once.

“It’s just really important for people to be cautious when they use these things, because even though they can be a really good interest-free tool to help you kind of make it from one paycheck to the next, there’s also a lot of risk in mismanaging it,” said Schulz. “So people should tread lightly.”

Lending Tree’s findings come after Billboard revealed that about 60% of general admission Coachella attendees funded their concert tickets with buy now, pay later loans, sparking a debate on the state of the economy and how consumers are using debt to keep up their lifestyles. A recent announcement from DoorDash that it would begin accepting BNPL financing from Klarna for food deliveries led to widespread mockery and jokes that Americans were struggling so much that they were now being forced to finance cheeseburgers and burritos.

Over the last few years, consumers have held up relatively well, even in the face of persistent inflation and high interest rates, because the job market was strong and wage growth had kept up with inflation — at least for some workers.

Earlier this year, however, large companies including Walmart and Delta Airlines began warning that the dynamic had begun to shift and they were seeing cracks in demand, which was leading to worse-than-expected sales forecasts.