Who Controls Payment Initiation?

Payment initiation is the point at which a customer instructs a payment. Banks, payment companies, technology firms and merchants are competing to determine where that instruction begins and which systems process it.

Control of payment initiation can affect the customer experience, access to payment data, transaction routing and the fees charged for moving money. It can also influence which payment methods customers see first and how quickly instructions are sent for processing.

Customers may initiate payments through a bank’s digital channels, a merchant’s checkout, a mobile wallet or a third-party application. Each channel can connect customers to different payment methods and processing systems.

The competition is linked to the growth of digital payments and account-to-account transfers. These transactions send money directly between bank accounts and can reduce the use of card networks for some payments. Payment companies are seeking access to customers at the point where payment choices are made.

Banks retain the account relationship and hold the underlying funds. Technology and payment companies often provide the interfaces, processing tools and services used to initiate transactions. Merchants influence the payment options presented at checkout.

The main issues include customer consent, security, responsibility for failed or fraudulent payments, data sharing and rules for third-party access to bank accounts. Regulators and industry participants are setting the conditions under which providers can connect to payment accounts and process customer instructions.

The structure of payment initiation will determine which companies provide payment interfaces, which systems connect buyers and sellers, and how revenue is divided across the payment chain.