Payments solutions provider Spire has launched a pay-by-bank solution designed to cut transaction fees and boost consumer rewards.

The Pay with Spire platform uses the Discover Network to facilitate ACH point-of-sale transactions with 50%-90% lower merchant processing fees than the respective industry averages of 2.5% and 1.7% for credit and debit card transactions, Matt Brennan, chief executive at Spire, told Bank Automation News. The value of the partnership was not disclosed.

Discussions between Spire and Discover began in late 2022, and the integration was completed in the spring of 2024, Brennan said. The integration process wasn’t specified, but Discover uses APIs to enable third-party integrations on its network, according to the company.

“What we’re really excited about is the fact that we have been in the pay-by-bank space for quite some time trying to really solve what has been a challenge for merchants, and that is rising costs of credit and debit through increasing interchange fees,” he said, adding that the biggest challenge was getting consumers to adopt the payment type.

More merchants are expanding payment options in response for rising demand for frictionless digital options increases, Matt Sloan, vice president of international markets and payments services at Discover, previously told BAN.

Target sectors for Spire include energy and branded fuel, but it is also looking to work with grocers and convenience stores, Brennan said.

Simplifying ACH

The partnership enables Spire’s technology to communicate directly with Discover’s network, allowing merchants that accept Discover to process Spire transactions without additional integration, Brennan said.

“We actually created technology to translate between a regular ACH transaction for the consumer to the networks,” Brennan said. “And the purpose of that was to see if there was a way in which we could instantly integrate with all the points of sale across the United States.”

In addition to lower transaction fees, Pay with Spire provides:

• Merchant branding for higher conversion rates;
• Tokenized consumer financial data;
• A 98% transaction approval rate; and
• Personalized rewards for consumers.

Gen Z seeks credit alternatives

The Pay with Spire launch comes at a time when consumers, particularly Gen Z and millennials, are seeking alternatives to credit cards while still wanting rewards, presenting an opportunity, Brennan said.

Sixty-three percent of Gen Z consumers opt for buy now, pay later services instead of credit cards, according to an April 1 report from Cash App.

“They’re all trying to find alternate payment types that don’t risk the debt that could come with a credit card, but they want rewards,” he said, noting that more and more consumers are opting to link their bank accounts to fintechs such as PayPal, Plaid and Venmo. “It’s kind of been the failure of debit. Debit kind of gives you the opportunity to not have debt, but there’s no benefit for it.”

Other merchant AHC pay-by-bank solutions fintechs include:

• PayPal;
• Square;
• Stripe; and
• Ayden.

AI-powered incentives

As adoption increases, Spire expects transaction volume on Discover’s network to grow significantly Brennan said, adding that one merchant has already shifted 2% of its transactions to the new system in six months.

Discover plans to continue collaborating with Spire on developing new payment technologies, Bill Dulin, vice president of business development at Discover, told BAN.

Spire also plans to enhance benefits for consumers as it refines its data using AI-driven insights, Brennan said.

“As we actually learn more about the cohorts, we’re able to predict and therefore message and reward you in the way that you want to be rewarded,” he said.

Register here for the upcoming Bank Automation News webinar “Emerging fintechs: New technologies you need to know now” on Tuesday, April 8, at 11 a.m. EST.