As retailers look to cut transactional costs, one startup is trying to solve that problem with direct payments from customers’ bank accounts. PayWithMyBank is working with retailers to help them accept ACH payments from customers. By using its tools, merchants save money on interchange fees and provide customers with a card-free option at checkout. 

On Thursday, Redwood City, California-based PayWithMyBank announced it was merging with Stockholm-based Trustly. These companies allow customers to log into their online banking directly from the merchants’ websites or apps and pay out of their bank account. Customers log in on a secure portal and never have to leave the merchant’s site.

Alexandre Gonthier, CEO of PayWithMyBank, told Bank Innovation that the company doesn’t spend any effort marketing to consumers. His company pitches to retailers its ability to attract younger customers who don’t want to pull out a debit or credit card, and the more seamless experience increases conversion rates. The company covers all charge-back fees, and it saves merchants money on interchange fees. He said the company, whose vendors include DraftKings, FanDuel and nonprofits such as the United Way, aims to beat merchants’ current debit card costs by 20%.

In the past, retailers have tried to cut out interchange fees by using their own ACH payment systems. Target and Nordstrom, for example, have their own debit cards. Target offers 5% cash back on its debit card, and Nordstrom offers a point-based rewards system.

Whether or not retailers will prefer to outsource their ACH payment systems to third-party companies or build their own cards in-house is unclear, but a key challenge with ACH payments is convincing customers to adopt a new payment method. There’s also the question of whether the savings on interchange fees are large enough to justify the development of ACH-based payment vehicles from consumers.

The Durbin Amendment capped the amount merchants must pay in interchange fees at 21 cents plus .05% of the transaction, which limited the advantage of ACH payments over debit card payments for merchants. ACH payment costs vary, but they start at around 20 cents. Before the Durbin Amendment, retailers paid about 44 cents per debit transaction on average. As far as retailers creating their own system to accept ACH payments, consumers are often reluctant to carry around another card. 

David Gyori, CEO of the financial technology training company Banking Reports, told Bank Innovation there are many advantages to online banking e-payment companies like PayWithMyBank. International card payments often face delays, but online banking e-payments do not. He also noted that retailers appreciate the fact that they don’t have to worry about charge-back fees like they do with cards. 

While online banking e-payment companies don’t share individual consumers’ spending data, the merchants appreciate the anonymous aggregate data the companies provide. Gonthier confirmed with Bank Innovation that PayWithMyBank doesn’t share any individual spending data with merchants.

Despite the reduced cost for merchants and the ease for consumers, companies like PayWithMyBank and Trustly face stiff competition in the market. “What these companies are trying to do is amazing, but they will not be the ones who will put Visa and Mastercard out of business,” Gyori said. “The biggest deal online and offline will be mobile wallets.”