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VSoft Corp., a provider of digital-banking and payment solutions to financial institutions, on Wednesday launched the Bread network, a peer-to-peer, consumer-to-business, business-to-consumer, and business-to-business payment network.
Bread enables real-time payments between financial institutions within its network. Money sent and money received is kept within the users’ respective financial-institution accounts, as opposed to a holding account owned by a fintech provider.
In addition to these payments, users can initiate same-day ACH, traditional ACH, and Clearing House Real-Time Payments service if one or both of the user’s financial institution is not in network. VSoft included these alternative payment options to broaden its appeal to consumers and merchants and position itself as a complete payment offering.
“Our approach removes fragmentation in payments by enabling users to move money as they choose, whether it be real-time, same day, or in a couple days,” says Kevin Olsen, senior vice president, payment solutions, for Atlanta-based VSoft. “These options also allow financial institutions to maintain a single system for these types of transactions instead of a separate app for each one.”
When a Bread user makes a payment, the money is transferred from his account directly to the payee’s account. To initiate a purchase at a merchant, consumers present at checkout a QR code generated by the Bread app on their smart phone. To accept Bread, merchants need to enroll in the network through their merchant bank.
Each QR code contains the consumer’s bank-account number and routing number. Consumers can instruct the Bread app to include that information on each QR code generated for payment when setting up their profile through their financial institution. Doing so eliminates the need for consumers to enter that information for each Bread transaction prior to generation of the QR code, avoiding what Olsen calls friction in the transaction.
VSoft will begin rolling out the Bread network through Corporate America Credit Union, a service provider for more than 400 credit unions across the country. The company is also talking to other financial institutions and banks, Olsen says.
While VSoft did not disclose merchant fees for its service, Olsen says the cost is similar to that of an ACH transaction, roughly 4 cents to 4.5 cents per transaction.
Two challenges facing the Bread network will be building brand recognition and consumers’ trust in the brand, says Sarah Grotta, director, debit and alternative products advisory service, at Mercator Advisory Group.
“There are lots of other payment platforms that consumers interact with that they know and trust, such as PayPal or the credit card networks,” says Grotta. “To gain consumers’ trust, Bread needs to promote its point of differentiation, otherwise there is no motivation for consumers to favor the app over others they already use for payments.”
