I’ve never been a fan of “Pay by Bank.” It’s a solution in search of a problem, especially when compared to the efficiency of debit cards and the global reach of Visa Direct. Now, two major developments have dealt a significant blow to the already weak business case for this payment method.

Whammy #1: Durbin Rate Changes

A recent ruling by U.S. District Court Judge Daniel Traynor is set to further upended the economics of debit card transactions. The cap on “swipe fees” that banks with over $10 billion in assets can charge merchants has been struck down. This is a big deal. These fees are now expected to drop to around $0.10 to $0.12 per transaction, nearly a 50% reduction.

For merchants, this is a game-changer. The primary motivation to adopt a new payment method like Pay by Bank was to lower transaction costs. With debit becoming so much cheaper, that incentive is largely gone. Why would a company invest in a new, clunky payment system when the old, reliable one is now more affordable?

Whammy #2: The Price of a Bank API Call

As if the debit card changes weren’t enough, major banks like JPMorgan Chase are now putting a price on API access. This is the technology that allows third-party services, like those that power Pay by Bank, to connect to a customer’s bank account to verify ownership and check balances. This crucial step in the Pay by Bank process now comes with additional costs of $0.05 to $0.15 per transaction plus $1.50 one time (other banks to follow).

These costs establish a pricing floor for Pay by Bank, making it inherently more expensive than debit. So, while the cost of debit is going down, the cost of Pay by Bank is going up. It’s a classic squeeze, and Pay by Bank is caught in the middle.

The Fallout

This double whammy is bad news for the entire Pay by Bank ecosystem. Companies like Trustly and Plaid, which have built their businesses on this model, are now facing a much tougher market. Their value proposition has been significantly eroded. Disbursements will remain a key service, while anything merchant facing (like Verizon’s bill pay) will be impacted substantially. Debit cards are ubiquitous (banks, merchants and consumers) and now cheaper to accept. Visa Direct will continue to reign in FinTech.  The future for Pay by Bank looks bleak. It was a technology that never quite made sense, and now, it’s a technology that doesn’t make financial sense either.