Discover Financial Services is expected to announce a deal this week with fintech company Buy It Mobility Networks that will enable Discover cardholders to pay merchants directly from their bank accounts with no debit or credit card needed. This type of payment process has long been popular in the Asian region, being driven by big commerce players WeChatPay and AliPay, but has been slow to catch on in the U.S. where shoppers prefer to use branded credit and debit cards for purchases. Banks that issue cards to consumers benefit from significant interchange fee income when their cards are used to make purchases, and so have been slow to make alternative payment methods available to their customers. The Discover Global Network is reported to include more than 11 million merchants, who would presumably welcome a direct-from-bank payment process as a way to reduce the interchange fees they pay to accept bank-issued credit and debit cards.
Buy It Mobility (BIM) technology uses the ACH network to move money between consumers’ banks and the merchants they purchase from, but it’s not entirely frictionless; consumers must enroll to participate. Merchants are happy to entice consumers to do so by sharing a portion of their fee savings in the form of discounts and incentives; a gallon of gasoline can be up to $0.25 cheaper at a participating station when the consumer opts to pay with BIM.
While Discover cards are widely accepted at merchants in the US, the card network has been working hard to increase its share of purchase transactions.
“It’ll give us at Discover another arrow in the quiver,” said Jason Hanson, senior vice president of global business development at Discover.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group