If a few years ago there was global speculation about the magnitude and impact of Open Banking and PSD2 on the speed and accessibility of financial transactions, at present, Open Banking has reached an age where we can see and live the practical application of what it used to be an idea. Real-time payments are the ground 0 of these practicalities, while A2A payments are the level-up. At the same time, we are living in a world where innovation paired with regulation has cleared the path for merchants and banks to decrease the influence of card schemes on the payments ecosystem. Stressing ‘decrease’ as conveying a radically different nuance as ‘overwriting’. But progress is being made each day.
The reality in the field is that real-time payments have become the end-goal of technology providers, banks, governments, and users alike. According to Worldpay’s Global Payments Report 2022, 20 European countries are part of the centralised instant SEPA credit transfer (SCT Inst) scheme, while of the non-SCT Inst countries, the UK makes the most payments (close to 8 million per day).
The latest Status Update on SCT Inst Scheme from the European Payments Council states that, as of June 2022, there are 2,360 registered SCT Inst scheme participants (PSPs employing the scheme) representing a share of 61% of all SCT adherents (i.e. 3,872) in all SEPA countries (and 68% for the EU and 71% for the euro area only). Therefore, even though A2A payments as a practical concept is still far away from sweeping the world in terms of monopoly, instant payments and direct bank transfers are invariably at the moment the status quo of A2A.
In the UK, the Payments Strategy Forum, observed by the Bank of England, the Prudential Regulatory Authority, the Financial Conduct Authority, and the Payments System Regulator, have been making visible progress in creating a new payments architecture – the NPA – to replace the architecture used for today’s UK retail interbank payment systems (Bacs and Faster Payments). As the PSR explains, it is envisaged that clearing and settlement of payments will take place over a single purpose-built central infrastructure rather than the separate infrastructure that is currently used.
On a global level, 60 markets operate a live, real-time payments infrastructure, with Canada, Peru, New Zealand, and Indonesia launching in 2022. Southeast Asian countries are at the forefront in terms of adoption of instant payment platforms, India registers the largest volume of instant payment transactions in the world, reaching 39.8 billion in 2021, while in May 2022, Brazil’s instant payment platform Pix has been used by more than 115 million users since its launch in November 2020, according to a recent ReportLinker study.
In June 2022, news coming from the Nordics region saw P27 Nordic Payments announcing its plans to become the new national Clearinghouse in Denmark for traditional and smart payments for businesses and private consumers. The Clearinghouse would also enable bill settlement and real-time payments to other Nordic countries, including Sweden and Finland, with Norway expected to join later.
In the Netherlands, according to research conducted by GfK, compared to 2020, the number of iDEAL payments increased by 28% in 2021. Online identification and logins with iDIN rose by 33% and Incassomachtigen (e-mandates) by 13%.
In late 2021, NPP Australia merged with eftpos and BPAY Group to form Australian Payments Plus. This ACCC-approved fusion will enable better coordination of investment across the three payment schemes, creating a more innovative and sustainable Australian payments landscape.
A major topic of discussion in Europe in the last year when it comes to both A2A and instant payments has definitely been the EPI (or European Payments Initiative). It is a coalition of 31 banks and 2 payment service providers across 7 European countries (Belgium, Finland, France, Germany, the Netherlands, Poland, and Spain) currently covering 65% of all European payment transactions. The aim of EPI, as per its own explanation, is to create a unique payment solution that will become the new normal for European consumers and merchants for all payments in a shop, online, and between friends and family.
The proposition gained traction at its inception by attempting to create a European card scheme, which did not pan out and resulted in the initiative redefining its scope and goals closely surrounding A2A payments. With a framework designed to aggregate everything from recurrent payments, deferred payments, and split payments, to donations, the initiative has added a couple of functionalities to its scope in 2022. Martina Weimert, CEO of the EPI Interim Company, has detailed for The Paypers that in the third quarter of 2023, EPI plans to go live with P2P and P2Pro, with goals to dive into ecommerce a couple of months later.
In the US, the Federal Reserve began onboarding pilot participants onto the FedNow Service, signalling the initial testing phase in May 2022. According to the announcement, a few organisations have already connected and delivered test messages over a pilot version of the FedNow Service, marking a milestone for the service, which remains on course to launch in 2023.
When it comes to technology providers in the A2A payments ecosystem, in July 2022, Open Banking platform Tink rolled out an upgrade to its payment stack with the launch of settlement accounts, a new feature that aggregates PIS settlement.
Another notable development came from A2A payments provider GoCardless, launching Instant Bank Pay and an anti-fraud feature, Verified Mandates, in Germany.
One trend that was pervasive in the last year refers to a number of banks and technology providers building and making available real-time Euro payments services, based on the real-time pan-European SEPA Instant scheme. Modulr, TrustPay, banking group Citi, and British PSP Answer Pay are just a few players who have introduced SEPA facilities to their portfolio in 2022.
One of the most relevant names when it comes to investments in developing A2A payments services is payments provider GoCardless. The company announced a series F funding of USD 95 million in December 2021, and it continued with series G in February 2022 amounting to a striking USD 312 million.
In May 2022, up-and-coming fintech kevin. raised USD 65 million to bypass card payments with account-to-account payments. Its plan is to be available as a payment option across some 35% of European electronic point-of-sale terminals by the end of 2022 and then 85% the year after that.
Examples like these two rounds of investments are not alone in the ecosystem. Token raised USD 40 million to expand A2A payments and Open Banking connectivity across Europe – and the investments in this field will keep pouring in. It remains to be seen how the practicality of it will impact the slice of pie that A2A will take from the global market share.
This article was first published in Payment Methods Report 2022, the most updated overview of trends and developments in the payment methods space and the innovative technologies that these methods work upon, emerging consumers habits, and strategies on how to win at conversion and retention.
About Alexandra Constantinovici
Alexandra is Senior News Editor at The Paypers. A passionate writer, Alexandra has an extensive background in journalism – as a graduate of Journalism and Communication studies –, as well as editing, publishing, and marketing. She coordinates the news coverage at The Paypers and, together with the team of editors, she strives to bring forward the latest trends for our readers, while investigating and sharing with our community the upcoming innovative industry shifts.
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