Profiting From Payments – Appbrilliance

Profiting from Payments:

Empowering Consumers and Businesses with Push-To-Business Payments (P2B)

Executive Summary

Payment transactions should be as simple as exchanging cash for apples with a fruit vendor at your local farmer’s market. But over time, the process has become complex and favors a few powerful companies and intermediaries rather than the consumer or business. We are at the precipice of an entirely new payments model that will empower consumers and merchants to take greater control of their payments. This whitepaper describes how AppBrilliance’s Money API-powered Push-To-Business (P2B) payment model upends the decades-old traditional model and shifts power back to the merchant when it comes to payments fees. The development and adoption of P2B ecosystems based on this ‘API for cash’ occurs in five discrete steps. At each step, support expands for specific and innovative new business models by a variety of potential P2B partners. It builds on the direct push-payment support structure online, in-app and at retail point of sale. Ultimately, anyone with a funding account—bank or non-bank—can transact electronically with P2B ecosystems enabled by the AppBrilliance Money API, wherever digital interactions—and information—can flow over public networks.

A Payments Problem in Need of a Solution

Consumers and merchants have had no choice other than cash, check or payment cards in conducting business for decades. The addition of Internet-enabled commerce and greatly expanded payment volumes has resulted in higher payment processing cost for many businesses as the payments ecosystem of issuing banks, card networks, merchant acquirers and processors has consolidated– even as the price for other information services has fallen exponentially.

AppBrilliance has solved the problem. Its patented Money API technology democratizes control-enabled banking APIs—putting consumers in control of their bank’s payment rails. To understand the context of this breakthrough and its impact on the future of payments, we need to review the history and the problems with the current payments model.

AppBrilliance’s breakthrough has arrived at a moment when traditional card-based payments and data aggregation “middleware” are on a collision course. Businesses in the US are looking for faster, safer, better, and more cost-effective ways to enable mass adoption of non-card payments. Despite persistent efforts by legacy bank card issuers and networks to adapt debit and credit cards to a digital-first world, such as promoting the adoption of contactless cards in response to a touch-phobic public during the Covid pandemic, or offering Visa Direct and Mastercard Send as quasi-real time ‘faster payment’ option that is still tolled by their respective networks, businesses are demanding radically less expensive, lower-risk payments. This demand has fueled the boom in alternative payments (Alt-Pay) in the U.S. enabled by financial data aggregation platforms. But getting to this point hasn’t been easy.

A Brief History of ACH

Historically, consumers, merchants, corporates, billers, and other payment system users have looked to the Automated Clearing House (ACH) system as a cost-effective alternative ‘rail’ for payments other than by credit or debit cards. NACHA, which oversees the ACH, has been willing to comply, seeking new demand for transactions that cost .25% (or less). But ACH is a batch network. While same-day ACH is available between some banks, it can take up to 5 days to clear and settle many transactions. This delay drives up transaction risk and leaves users vulnerable to delayed payments and overdraft fees. However, they enjoyed lower costs. So groceries and pharmacies in particular—which also went for PIN-debit card transactions in a big way in the 1990s—were quick to try ACH—at least for their store card programs. But other merchants, and many consumers, stayed on the ACH (and PIN) sidelines.

By the early 2010s, ACH had become mainstream—with various providers offering guaranteed ACH (along with guaranteed checks)—but at typical pricing of 150-200 bps, which was better than credit cards, it was still more expensive than regulated debit cards for larger ticket purchases. Big merchants were able to negotiate even lower rates (including for credit cards, too), but by the mid-2010s, bank card network rules and impediments to network choice persisted, so many merchants continued to experiment with ACH-based Alt-Pay business models (including in digital and mobile wallets). ACH adoption for purchases remained stalled at a low level, and the search for timely and efficient payment options continued.

The Rise of Account-to-Account (A2A) Payments

Since 2015, two payment options have emerged. The first, in the form of the ‘faster payments’ initiative by the Federal Reserve, was launched in 2015 with the promise to connect to all banks and credit unions, is still baking. The second, Peer-to-Peer (P2P) payment options — particularly Venmo™ (a PayPal™ company) and Zelle™ (provided by Early Warning Systems, owned by less than a dozen big banks)—have been widely embraced by consumers and small businesses as a primary means of making A2A transfers and exchanges. While Venmo is being tentatively extended to payments for retail purchases at some merchants, technical integration issues have limited the reach of both Zelle and Venmo (and other P2P networks) into true debit/credit alternatives for consumer payments.

Finally, in early 2021, new attempts at A2A payments emerged, with some account aggregators (like Plaid) offering to facilitate account transfers and even purchase payments. Yet, the account aggregator model remains unacceptable to some big banks and consumer groups, and the technical limitations of the account aggregation platforms limit settlement to batch ACH. While the Department of Justice views these payment option as a competitive threat to Visa (and the reason for blocking its acquisition of Plaid), the limitations of settlement over ACH drive up the cost of these alternative payment rails, limiting their general appeal to higher-risk markets such as crypto currency exchanges and legalized gaming and gambling.

All of these attempts at finding a faster, better, safer and cheaper way to pay that is more suited to our digital times have failed to ‘crack the code’ of scalable Alt-Pay. A scalable Alt-Pay solution must:

Provide direct money movement, bypassing intermediary toll-takers;
Allow for “good funds” credited instantly, greatly reducing transaction risk;
Materially lower the cost of payment acceptance for businesses of all sizes;
Clearly inform users how their account data and credentials are used, stored, and monetized;
Enable alternative forms of stored value and credit.

Enter AppBrilliance and P2B Payments

Today, AppBrilliance is proposing the ultimate alternative payment solution for our times: P2B (Push-to-Business) Payments. P2B enables real-time, virtually non-interruptible, consumer-pushed payment modes that accommodate a growing number of new business and revenue models. P2B leverages widespread consumer adoption of P2P at the bank level, unifying these capabilities into a consumer and business friendly payment ecosystem that is more open, flexible, and powerful than other alternative payment options. With P2B, the inconvenience of ‘pulled’ payments for card accounts and ACH goes away, as consumers control not only how and when the payment is made, but also how their data is exchanged and ultimately monetized.

The fundamental breakthrough technology that enables P2B is called the Money API™.

Today, AppBrilliance’s Money API enables consumers to use bank accounts to fund purchases with businesses using the P2P rails enabled by their bank (such as Zelle™ or RTP). P2B payment platforms empower consumers to directly pay their favorite businesses from the privacy and security of their account, without being forced to share their underlying financial data with third-parties. These direct payments will save consumers money by lowering the cost of payment acceptance and increasing competition.

Money API-powered P2B payments are superior to A2A payments enabled by account aggregation services such as Plaid, Finicity and Yodlee. By facilitating a direct connection between the consumer’s device and their bank-integrated P2P services to push payments in real time, Money API-powered P2B payments avoid having to centrally store sensitive banking data or user credentials. Instead, bank credentials and session data are encrypted and stored securely on the user’s device, and no account data is persistently accessed or stored on the P2B network without explicit consent of the consumer – and even then, this information is never stored by AppBrilliance.

In contrast, account aggregators centralize the process and storage of consumer’s sensitive banking data and account access credentials. They persistently and periodically access and monetize this data—even after the transaction is completed. This shifts the power from the payment networks to account aggregators, vs the consumer and the merchant.

P2B payments reverse the power dynamic—consumers and the merchant control the data and financial exchange, which will ultimately lower both transaction processing costs and the cost of goods and services.

Understanding P2B Payments

P2B payments mark the logical end-point in a 25-year progression to harness the Internet for secure, real-time bank account transactions. Money API-powered P2B payments enable dynamic, transparent and fluid flows of good funds without relying on a custodial middle-man. P2B transforms a consumer’s account into their trusted wallet for the 21st century for their benefit – not the benefit of the payment card industry or data aggregators.

The “push” payment of “P2B” enables the consumer to have total control over the transaction. All transactions are authorized locally on their computer or mobile device – even at retail POS – where Money API-powered P2B payments are run “over the top” of the P2P systems integrated by the consumer’s bank.

The “business” part of “P2B” refers to a broad, future-forward ecosystem that enables businesses to exchange discounts and rewards for direct payments. In the future, it will include alternative methods of funding purchases – ranging from crypto currencies to dynamic lines of credit provided by both banks and non-traditional lenders that can now reach consumers directly at the time and place of purchase.

This ecosystem is enabled by a ‘federated’ (encrypted and non-centralized) data model that neither stores user access credentials nor centralizes transaction data. It facilitates the exchange of transaction or account information — on a permission basis — where it will benefit the consumer in the forms of net-lower prices, or the network in the form of new lines of business, higher transaction volumes, or lower transaction costs. This includes those businesses taking payment, the consumer making the payment, and the entity providing access to the funds. At scale, the P2B payment ecosystem could drive payment costs negatively – transforming payments from a cost center to a profit center for businesses.

The Money API-powered P2B Payments Ecosystem

P2B enables direct, real-time payments for banked, internet-connected US consumers and businesses. To simplify adoption at scale, a business may either integrate the AppBrilliance Money API into their payments flow, or inquire if P2B services are enabled by their payment processing partners or POS provider.

AppBrilliance is partnering with payment processing partners, merchant acquirers and networks to enable P2B services for merchants at scale, and developing extensions to its platform that will support emerging payment needs and innovation:

Federating the data stream from linked bank accounts for opt-in, protected use in value-added services (via AB Data API™)
Expanding Money API coverage for smaller financial institutions, and making P2B available to Guaranteed ACH (GACH) providers to lower their risk and underwriting costs
Enabling Buy Now/Pay Later (BNPL) for P2B purchases
Facilitating Consumer & Ecosystem monetization of Federated Data through blended analytics of bank account data along with behavioral, demographic and SKU-specific data from participating retailers in step five.

These extensions will grow the type of transactions possible on P2B networks powered by Money API services, providing partners with unprecedented payment efficiencies, and facilitating secure, opt-in data sharing involving consumer purchases.

This latter ecosystem capability—offered with full transparency and user volition—ultimately bears the promise of transitioning payment processing from a $100B+ cost center for US companies in the legacy payments ecosystem into a multi-billion dollar profit center as unique and streamlined real-time transaction data powers incremental consumer purchasing and investment behavior for the next generation of payments.

Step 1: Simplified Direct Payments with P2B

Initially, AppBrilliance’s Money API will facilitate direct payments between consumers that bank at the top five U.S. banks (Chase, Citibank, Bank of America, Wells Fargo, and Capital One), and businesses connected to the P2B ecosystem either directly, or through their participating payment processing partners. AppBrilliance converts these bank’s P2P rails into a secure payment-ready API and acts as a network controller for P2B nodes, facilitating movement of funds between banks over a supported common P2P rail. The business taking payment over P2B gets instant good funds at the time of sale in all cases, paid directly from the consumer to an account for the benefit of the retailer at supported banks.

These P2P-enabled business banks optionally monetize these payments on a per-item basis, but these fees can approach zero for the retailer at banks such as Chase. In this first step, AppBrilliance is not providing any data services.

Step 2: Capturing the Data Stream via AppBrilliance Data API™

In this first platform extension, qualified PCI/SOC-Compliant P2B nodes have the option to receive a real-time streaming data feed out of AppBrilliance’s back-end system that contains a user’s linked bank activity – provided that the consumer opts into this data sharing. This feed represents the initial implementation of AppBrilliance’s P2B Data API™.

Data will be uniquely encrypted. In order to analyze the data, the partner will request a key from AppBrilliance that will unlock that specific set of account data. Usage of the data is subject to license restrictions under the partner’s agreement with AppBrilliance, in accordance with the consumer’s permission. This data is unstructured data. The receiving partner is responsible for normalizing and enriching and securing this data, utilizing the key standard adopted by the federated data model.

Step 3: Expanded Bank Participation

The P2B ecosystem will begin to expand the types of partner nodes on the Network significantly with this third extension.

In this step, the Money API and P2B ecosystem adds support for hybrid push-pull transactions by supporting real-time account linking with smaller banks and credit unions that do not directly support push P2P at the bank level.

Today, Guaranteed ACH (GACH) is dependent on data aggregation.

Guaranteed ACH (GACH) platforms will be welcomed as P2B nodes and encouraged to join the ecosystem by working with the AppBrilliance Money and Data APIs. In doing so, these GACH platforms will grow their payment network and act as funding source alternatives for P2B-integrated businesses. GACH-enabled flows from linked accounts will result in the same real-time funds availability for the retailer, but funds will be pushed from a P2B-enabled partner node that will be funded by the GACH partner. GACH nodes will settle via an ACH debit with the consumer. The Data API will provide the GACH partner with a secure federated data feed from the consumer’s account. A “success” response from a partner GACH node based on this federated data will trigger the payment to the retailer in real-time and the collection of ACH funds asynchronously.

By facilitating the vast majority of payments directly as good funds between the consumer and business as P2B transactions, AppBrilliance and the P2B Ecosystem would only need to run a transaction over a GACH rail if the consumer’s bank does not support real-time P2P capabilities for their account.

AppBrilliance will leverage its proprietary bank integration platform to eliminate the expense of data aggregation for our ecosystem partners while reducing network risk by minimizing the use of pull-based ACH transactions when push-based P2P rails are available. Linking accounts will validate account ownership and authorization by the consumer, and verify and share – with consumer opt-in — account information such as transaction history, available balance and DDA account number. These alternate hybrid push-pull capabilities close the gap in supported FIs between the top banks where AppBrilliance’s Money API directly supports push payments over their built-in P2P rails, and the long-tail of approximately 11,000 U.S. financial institutions that have not yet deployed real-time P2P capabilities for their customers.

By eliminating the cost of data aggregation and enabling direct real-time payments, GACH providers acting as P2B nodes will be able to process payments at higher margins while lowering fees by as much as 50%.

Step 4: Enabling Buy Now/Pay Later & Lines of Credit

Additional partner nodes come into play in the fourth extension: enabling fast-growing Buy Now Pay Later (BPNL) companies such as Affirm or Klarna and other providers of alternative consumer credit to tap the P2B network as an optional source for funding consumer payments. These nodes would leverage our Data API in Step 4 to optionally tap into purchase transaction flows. Consumers would see the option to share transaction data with these nodes to receive in-line check-out offers, and/or link these funding lines at the time of check out. In the future, purchases at that same retailer could be drawn from one or more linked consumer bank accounts, along with these other funding lines.

Traditional consumer credit lines at issuing banks could be accessed over this same API, allowing large issuing banks to join the P2B Payments Ecosystem as a node, optionally bypassing the 16-digit PAN number and Visa/Mastercard payment card networks.

Step 5: Facilitating Consumer Monetization of Purchasing Activity

AppBrilliance will ultimately control the key exchange and data model that will define how P2B nodes authenticate and access SKU-data and enriched transaction data—while never storing or accessing this information for any reason.

With all available P2B nodes operating on a per-transaction basis, ecosystem partners have the option to transition between charging a small fee for facilitating P2B payments to an information-dominated business model where the P2B network would provide subsidized payment processing for P2B-enabled businesses in exchange for cart and SKU-related transaction information that can be augmented with the federated account data from linked accounts. In this fifth step, with strong data protection and informed, explicit user opt-in for sharing that information with the network in exchange for richer rewards, consumers can avail themselves of highly differentiated benefits. Here, SKU-specific information is contributed by the retailer and/or the POS partner as an element of the encrypted and federated data model and passed securely back to the network.

In this extension, the Money API-powered P2B payments ecosystem may include data enrichment partners where federated data and retailer-specific purchase information can be enriched with existing behavioral, demographic and attribution data. Critically, the consumer is always in control, and each network participant has the option whether to engage such enrichment partners.

Conclusion & Timeline

Committing and taking the first step on any journey is often the most difficult part. AppBrilliance has invested years developing the Money API to enable P2B payments.

AppBrilliance is working with businesses and licensed partners to integrate P2B payment experiences that are faster, better, safer and radically less expensive.

This whitepaper will be updated as each additional step is made toward bringing P2B payment options to market over the next 18-24 months.