We founded Link Money as a B2B payment infrastructure provider that allows merchants to accept payments safely and securely from their customers’ bank accounts. Our thesis is that payment processing in the US is extremely expensive for merchants. If you look at the average cost of processing for merchants to take credit or debit cards online, they can pay anywhere from 2-to-4% for payment processing costs. In other markets, there has been a notable evolution in payments towards bank-based payment methods and Open Banking – in the EU, for instance, 45% of all consumer electronic payments are bank-based. We are striving to be the leader in this area in the US.
The banking system in the US is extremely fragmented, with approximately 9,000 banks and credit unions. In contrast, in markets where Open Banking is already widespread, you see much more concentrated banking systems. For instance, in the UK, there are primarily five or six major banks, while Australia has four prominent banks, a structure also seen in countries like Brazil and India. Furthermore, the US lags in terms of regulation; unlike the EU, we don’t have any federal regulation or legislation setting the standards for Open Banking.
However, this means that there is also a very significant opportunity to drive payment costs down. Debit and credit interchange rates in the EU are fractions of what they are in the US, which has a larger economy and a larger digital payments ecosystem.
We’re tackling a complex problem with a higher merchant margin and a vast market. In the US, Pay by Bank is cheaper than debit/credit interchange, but Open Banking made it seamless and secure. We’ve built a sleek software layer over the traditional US bank transfer system, ensuring regulatory compliance and payment predictability. Our checkout experience mirrors credit cards: consumers link their bank accounts and click ‘pay,’ despite the underlying plumbing differences.
We are the first solely US-focused company providing an Open Banking powered Pay by Bank payment method in the US. In addition to our seamless UI, we also guarantee certain transactions for the merchants – if we accept the transaction, and the consumer cannot pay, we make the merchant whole. More broadly, US consumers spent around USD 1 trillion online in 2022, costing merchants USD 25 billion in fees and resulting in USD 20 billion in fraud. This cost burden unsurprisingly ultimately gets passed on to consumers. If Link Money – Pay by Bank were used for even 10% of online transactions, merchants would save USD 2.75 billion a year.
How successful we will be remains to be seen – we certainly see a lot of merchant interest. This is because we are addressing a clear pain point, and the value proposition is crystal clear.
US consumers are used to paying with credit cards online. Our solution provides the same kind of seamless functionality as credit cards but is more secure and cost-effective. At the same time, it is a new payment method, so widespread knowledge and adoption will take time. But merchants have the incentive to push this method of payment – our interests are closely aligned with them – and we have seen very encouraging statistics showing that consumers are very interested in Pay by Bank, particularly when there are incentives attached. We are happy to work with merchants on these types of incentives. We also ensure that we provide the most tech-forward solution – if FedNow or other emerging payment rails evolve to support our use case, we will be ready.
We have seen a lot of interest from merchants, and we now have very significant high-TPV enterprise merchants integrating or using our product. That was not surprising to us. If you look at Europe, payment via bank account through a checkout flow has gained market share very rapidly and is now around 20% market share. It has taken a lot of volume from credit and debit cards in that market.
Regarding fraud prevention, we have a robust internal fraud screening process. Furthermore, our basic risk profile is favourable, as we primarily process transactions between consumers and merchants for products or services. Our focus is often on situations where the customer is known, and they frequently engage in subscription purchases or repeat transactions. We take privacy extremely seriously – we do not sell or rent any consumer data, nor do we ever have access to consumer bank login information. Finally, security is central to our product – we are SOC 2 certified and ISO 27001 compliant.
This interview was first published in the Open Finance Report 2023. We encourage you to download the report and find out the latest trends and developments in the world of Open Banking and Open Finance, as the road to Open Data continues.
About Eric Shoykhet
Eric Shoykhet is the Founder of Link Financial Technologies and Atom Finance, venture-backed software companies that collectively have raised USD 100 million. Previously, he was an investor at Governors Lane, an event-driven hedge fund. Before this, he worked in the Restructuring and Reorganisation group at Blackstone.
About Link Money
Link Money is a fintech focused on revolutionising payments in the US. Link Money aims to provide an alternative to the high payment processing fees that American merchants are burdened with. Link Money’s flagship product is called Pay by Bank. This solution offers a simple and secure way for consumers to seamlessly pay from their bank account, thereby reducing costs and enhancing security.
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