Real-time payments have been in operation for nearly fifty years, with the first system, Zengin, being established in Japan in 1973. Following Japan, the second real-time system in operation, SIC, appeared in Switzerland, in 1987, whilst Turkey implemented TIC-RTGS in 1992. Taiwan’s CIFS started operating in 1995, and several real-time payment infrastructures were developed from 2000 onwards, including those in Brazil, Mexico, South Korea, Iceland, and South Africa. In 2008, the UK introduced the Faster Payment System, as part of the response to the European T+1 payments settlement mandate of the Payment Services Directive (PSD). In those days, this was a near real-time solution. This started being looked into as an alternative to card payments for retail and person-to-person (P2P) transactions. Between 2011 and 2014, other systems followed, including those of Denmark, Sweden, and Poland, which have become the backbone of mobile wallet-based solutions. For example, Swish and MobilePay, some of the most successful instances of digitisation and cash replacement globally, became the key reference cases underpinning many A2A development ambitions. While the general reference to A2A payments is not limited to moving funds held in bank accounts and can include payments from and to prepaid digital wallets, this analysis focuses on A2A transactions involving bank accounts through IPS/RTP.
Source: Statista, Worldpay Global Payments Report 2024, industry press and A2A solution press releases, Arkwright Analysis
The timeline in Figure 1 illustrates the distribution of the launch dates for A2A payment schemes. While the graph is not exhaustive and only includes a sample of major developments, it is worth noting that the proliferation of these schemes happened in parallel with the adoption of mobile interfaces by consumers, the increase in connectivity speed, and the establishment of IPS back-end infrastructures. Currently, about 80% of central banks globally have deployed or are exploring IPS infrastructures, which is one of the key prerequisites for launching bank account-settled A2A payment solutions. This development could potentially make the payment type near-ubiquitous globally.
The A2A ubiquity assumption is based on the general belief that the cost of IPS transactions is sufficiently low not to constitute a barrier to consumer and merchant affordability or the economics of an A2A payment solution. However, this is not always the case.
While often overlooked in general industry discussions, this factor is far from being given for granted – or being a valid universal assumption. The relative size of the market versus the CAPEX and OPEX needed for the deployment and operation of IPSdrives the payment unit cost. Based on direct project experiences, the assumption that such payment unit costs are low enough not to impede retail payments modernisation is far from guaranteed.
In addition to the varying costs of IPS infrastructures – which differ greatly from vendor to vendor depending on the sophistication and features of the solution –, the actual size of the country is an unmitigable factor. In smaller countries, P2P and low-value retail payments may become economically unsustainable without subsidising infrastructure costs. Based on practical examples, this is the case in some markets where the price of IPS infrastructure is allocated on an account basis rather than a single transaction cost basis.
A2A payments are being hailed as one of the key enablers of payment modernisation – and potentially, a more cost-effective alternative to card payments. In this context, the marketing spin of vendors and A2A solutions abounds. On one side, this is based on the significant growth rates and uptake that some A2A solutions are achieving. On the other side, it often ignores some of the distinguishing features and value drivers that major international card systems offer as part of their value proposition, such as superior payer and payee protections and the ability to dispute transactions, compared to A2A solutions.
A2A schemes can differ, with some developing basic protection mechanisms. Additionally, some regulators are developing rules and regulations governing IPS payments, with them being reflected within the A2A solutions operating over the respective IPS infrastructure.
Adoption-wise, A2A payments are growing globally. In Europe, A2A accounted for 18% of the ecommerce transaction market share by value in 20231. According to reported statistics, A2A is the leading online payment method in Poland, the Netherlands, Norway, Sweden, and Finland. Unsurprisingly, the relevance of this payment type is expected to increase with the European Payments Initiative (EPI), which launched its payment wallet, wero. The initiative is underwritten and supported by most banks in France, Germany, the Netherlands, and Belgium.
Latin America has the highest A2A penetration globally, accounting for 20% of ecommerce transaction value in 20232, driven by the remarkable success of Brazil’s instant payment system, Pix. In contrast, adoption in North America remains low to date. This can be attributed to several factors: the development and rollout of IPS are only recent and have not yet achieved full market reach; the specific use case focus or funding methods of existing wallets; and the marked popularity of credit cards, which is reinforced by well-established habits, together with the widespread use of revolving credit and attractive card rewards.
In the APAC region, A2A leads, having the highest share of transaction volume globally in markets such as Thailand and Malaysia, driven primarily by P2P and in-store payments. However, the IPS A2A market share of online commerce transactions in this region was low, at 4% by value in 20233. In China, the market is dominated by closed-loop digital wallets, namely WeChat and Alipay, and A2A accounts for only 2% of the ecommerce transaction volume4.
Figure 2: Major A2A initiatives by market (selected geographies) and relative usage for online commerce by share of transaction value, 2023
Figure 2 illustrates the adoption of A2A payments for online transactions, highlighting the significant variance in adoption across different geographies. While growth is a common factor in these payment types, the growth rate varies significantly by use case.
Why do some A2A payments succeed while others fail to get traction? Why do they dominate some use cases but are marginal in others? There are a variety of factors that generally influence consumer preference and related adoption, amongst alternatives. While corporate payment decisions are driven by rational and factual factors such as cost and economic impact on their working capital, consumers’ choices are driven out of necessity, convenience, and cost. A higher behavioural inertia is driven by habit5, in addition to barriers to adoption such as cost and affordability.
Using different examples of payment value propositions based on real-time payments infrastructure from around the world, this analysis examines the factors behind mass adoption by consumers and businesses of payment services within a customer-centric innovation approach. The factors can be classified under three main categories – functional, emotional, and social. The working hypothesis assumes that successful adoption by users6 of payment services requires that their needs are met in a secure, cost-efficient, and timely manner – building confidence and trust in the use of the service over time.7
However, having access to the payment service does not necessarily guarantee its usage.8 To drive usage and mass adoption, users of payment services must be knowledgeable about their intrinsic value and benefits – and aware of how they work.
A study published by the International Journal of Innovation and Management9 reviewed over 43 different case studies related to the factors that influence the success or failure of innovative projects. Several learnings emerged, pointing to the fact that there is ‘no clear-cut evidence that strong policy, top management support or a high R&D intensity are factors that guarantee innovative success’.10 In the context of retail payments modernisation, this could be interpreted as an implicit limitation of a passive or a top-down mandated approach to payment system design, which by itself is not a guarantee of success. ‘Moreover, R&D intensity or the degree to which a product is considered “innovative” and “technologically advanced” is not unambiguously related to success. This points to the limitations of a one-sided “technology-push” approach’.11 Technological advancement is not a guarantee for successful innovation but ‘rather the few factors impacting success seemed to have the most to do with customer understanding and the most critical factor proved to be understanding user’s needs from the very beginning of the innovation effort’.12
Would a more modern payment system, particularly A2A, potentially suffer from such limitations? Prof. Clayton Christensen13 argues that ‘customers – people and companies – have “jobs” that arise regularly and need to get done’14. Nathan Furr, Associate Professor of Strategy at INSEAD, and Jeff Dyer, the Horace Beesley Professor of Strategy at the Marriott School, Brigham Young University, studied the approach used by entrepreneurs and startups. In their research, they propose an innovation framework15 that brings the customer to the centre of the innovation process and adapts the solution design to meet customers’ payment needs, referred to as ‘understanding what job the customer is trying to get done’.16 Within this framework, the ‘job to be done’ (alternatively referred to as a ‘need’ in this paper) combines functional, social, and emotional elements. These are interdependent and influence the user’s perception and decision to use a payment service regularly.
The central proposition of the working hypothesis of this paper is that the ‘job to be done’ aspect is the primary driver behind consumer adoption of retail payment services, including those developed over real-time payment rails. Service providers who have successfully launched payment services at scale appear to have leveraged, sometimes implicitly, this aspect of customer centricity in the design and implementation of their payment services. By successfully addressing all three elements – functional, emotional, and social –, they have created product stickiness and reached the tipping point leading to mass adoption.
Table 1: Key drivers for consumer adoption of retail payment services
Source: Section adapted from key documents in the World Bank Retail Payments Package, including ‘Developing a Comprehensive National Retail Payments Strategy’
These key drivers for consumer adoption of payment services can mean different things for the user – and are influenced by the social, infrastructural, and economic contexts in which the user is leveraging these payment services. For example, payment safety can be a functional, ‘must-have’, and (potentially) ‘given for granted’ job to be done in one country. In another country with high crime rates, it could imply having ‘peace of mind’ for the user, for whom the certainty of a successful payment receipt would otherwise not be possible. Therefore, the functional, emotional, and social nature of a need are not mutually exclusive. These are highly contextual and may have one or more types of classification simultaneously, as illustrated in Figure 3.
Figure 3: The overlapping nature of consumer needs
It is to be noted that while, in general, A2A as a payment type is growing, it is not an exception to the varied success of the single value propositions that have been launched in many markets over time. Our working hypothesis is that successful payment services managed to address the unmet needs of consumers. Once a minimum scale was achieved, they began diversifying into other areas to create product and brand stickiness. Within the limitations of the number of sample cases observed, and of those included in this article, we hypothesise that there has been one common thread in the success of these diverse payment services – the unmet payment needs of the users that were satisfied by addressing a combination of functional, emotional, and social aspects that drive user adoption. Figure 4 illustrates the analysis of a sample of cases: Swish, Pix, and PromptPay. These cases highlight that offering consumers value across all three job types leads to the working hypothesis that the ability to address customer needs is one of the key drivers, albeit not exhaustively, of their success.
Figure 4: Jobs to be done for Swish, Pix, and PromptPay
There are learnings from the innovation approach typically used by fintech startups which show that understanding the end-users’ needs and how these can be incorporated into the programme design and implementation processes may be important to the initiative’s success. The innovation framework proposed by Prof. Nathan Furr and Prof. Jeff Dyer centres on the three components of the ‘job to be done’ for the customer, illustrates that these are interdependent, and proposes that no solution can succeed without addressing relevant attributes of all three components into the design. This is a general consideration of the innovation design that could apply to retail payment services, not limited to A2A.
It is not important to address this aspect right from the outset, but for a retail payment service to reach mass consumer adoption, applicable components within these three categories will eventually have to be accounted for and built into the design:
Functional – e.g., enabling payments to be made inexpensively, securely, and conveniently at the basic level;
Emotional – e.g., providing peace of mind that the value transfer is completed within a set time, safely, and with no payment risks;
Social – e.g., enabling a sense of belonging or recognition as modern within peers or a community setting.
Successful consumer adoption and the above considerations do not diminish or challenge the need for comprehensive policy, regulatory frameworks, and baseline consumer protection. These are essential in enabling the environment and are key to their success. They should be developed to allow service providers to build customer-centricity into the design of digital retail payment services and deliver practical and perceived value to customers across all three dimensions.
This article includes content based on an analysis of A2A value proposition uptake drivers, previously developed in collaboration with Hemant Baijal in his former capacity as Senior Payment Systems Specialist and Consultant at the World Bank.
1 The Global Payments Report 2024, Worldpay.
2 Ibid.
3 Ibid.
4 Ibid.
5 Habit Persistence and Lags in Consumer Behaviours, T.M. Brown, Econometrica, July 1952.
6 Users include both buyers and sellers who are using retail payment services to meet their payments and financial needs.
7 emant Baijal and Harish Natarajan, ‘Innovations in Retail Payments,’ Payment Systems Design Governance and Oversight, Edited by Bruce Summers, 2012.
8 Raúl Morales Resendiz (Center for Latin American Monetary Studies), ‘The role of payment systems and services in financial inclusion – the Latin American and Caribbean perspective,’ paper prepared for BIS-IFC Seminar in Morocco, 2017.
9 Gerben van der Panne, Cees van Beers and Alfred Kleinknecht, 2003, Success and failure of innovation: a literature review, International Journal of Innovation Management, online: https://www.researchgate.net/publication/263425858_Success_and_Failure_of_Innovation_A_ Literature_Review. Accessed on 5 August 2020
10 Ibid.
11 Ibid.
12 athan Furr, 2015, Why even great innovations fail, Inc., online: https://www.inc.com/nathan-furr/why-do-innovations-fail.html. Accessed on 1 August 2020.
13 https://claytonchristensen.com/
14 Nathan Furr and Jeff Dyer, 2014, The Innovator’s Method, Harvard Business Review Press. Quote from ‘Deeply Understand the Job-to-Be-Done’, page 87.
15 Nathan Furr and Jeff Dyer, 2014, The Innovator’s Method, Harvard Business Review Press. Methodology includes components, not exhaustively, like the definition of customer value (‘job to be done’/‘problem to be solved’), customer persona, solutioning templates, and additional considerations resulting from the study of the innovation/proposition-development approach typical of startups and entrepreneurs.
16 Ibid.
This editorial piece was first published in The Paypers' Unlocking the Potential of A2A Payments Report 2024 – Changing the Way We Pay and Get Paid, which taps into the fast, ever-expanding A2A payments industry, being the ultimate source of information for businesses looking to grow their consumer base.
Partner at Arkwright Consulting AG with more than 23 years of corporate and product strategy experience in retail and corporate payments, open/embedded finance, cross-industry platforms, superapps, and ecosystems. Before his consulting career, Francesco was a transaction banker at Midland Bank. Fellow of the London Institute of Banking and Finance, INSEAD Alumnus, Francesco is a Learning Coach with INSEAD Executive Education for Strategy, Digital Transformation, AI, Fintech and Innovation programmes.
Arkwright is a high-end payments and digital financial services specialist strategy boutique. Founded in 1987 in the Nordics, Arkwright operates globally from offices in Hamburg, Oslo, Stockholm, and London, with additional operational presence in the Middle East and the US. Our fact-based analysis is grounded in deep industry knowledge and is based on a collaborative working approach with our selective clients.
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