How Pay-by-Bank Method Could Reduce Fraud and Boost Digital Payments In Mexico

Pay by Bank is a payment method based on open banking developed by the country’s central bank, and which also promises to lower the cost of transactions

The Bank of Mexico (Banxico) headquarters in Mexico City, on Friday Feb. 11, 2022.
February 02, 2023 | 05:33 PM

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Mexico City — Amid slow adoption of digital payments, Pay by Bank, the platform developed by the Bank of Mexico (Banxico) that facilitates payments and transactions from cellphones through free electronic transfers, could boost adoption and at the same time mitigate cyber banking fraud.

Pay by Bank is a payment method based on the concept of open banking, through which transactions are conducted in real time and do not require credit or debit card details, making online payments simpler, faster and more secure.

The platform could boost the use of digital payments, because it would help connect merchants with banks without the need for the buyer to provide their bank details in e-commerce, according to entrepreneurs in the fintech sector.

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So far, digital payments have not seen a widespread take-up in the country. According to Mexico’s Banking and Securities Commission (CNBV), transfers sent through digital payments increased from 38,000 to 220,000 transactions between October 2019 and December 2021, which remains low considering that there are millions of digital transactions.


However, despite its slow adoption, digital payments could increase, Alejandro Guízar, CEO of Billpocket, a physical payments startup that acquired the digital payments unicorn Kushki, and which uses Pay by Bank, told local media.

With Pay by Bank, a user only needs to provide the name of their bank and their phone number, and the system detects if they have a digital payment provider to make the payment automatically, Eduard Justicia, co-founder and CEO of Chilean startup ETpay, which implements this system, told Bloomberg Línea.

Bank of America implemented the Pay by Bank system in the UK at the beginning of 2022, arguing that one of its qualities is the reduction of fraud, because when buying online no physical card is required and it is an online account-to-account payment, so online sales companies do not need to obtain and store customer card data.

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Justicia, who recently brought ETpay to Mexico, said that Pay by Bank can help mitigate cyber fraud.

Cyber banking fraud from chargebacks totaled 2.38 billion pesos ($127.5 million) from January to September 2022, according to the country’s commission for the protection and defense of users of financial services (Condusef).

Among the advantages Bank of America also highlighted are simplified reconciliation, meaning that incoming payments are added to a company’s receivables, so the company can see everything together in one place, all made possible through an API, which in turn helps avoid card processing fees.

“The Pay by Bank model is coming to stay. It’s not a trend, it’s not a fad, because the payments industry is forced to change to accept the new reality,” Justicia, whose startup works with 100 merchants already employing Pay by Bank in Chile, told Bloomberg Linea.


Justicia said that in Latin America Pay by Bank is new, but that in Europe it is a model that is already positioning itself, as open banking is more advanced on that continent.

For Justicia, the first challenge is for people to understand how this system works, and the second is the use of cash in the region. In Chile, ETpay has already reached two million transactions per month, he said.

The next challenge is adoption, since in Mexico the use of cash still prevails, as it is the only way in which almost 40% of Mexicans receive their salary, according to the World Bank, mainly to avoid commissions.

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