A2A payments are direct fund transfers from one bank account to another, bypassing the need for additional intermediaries or payment instruments such as cards. Globally, between 2023 and 2027, A2A payments in B2C ecommerce are forecast to grow by a 14% CAGR, becoming an important payment method. While historically, they have been typically associated with specific bank account transactions, with users either making transfers from one bank account to another, or a direct debit, A2A payments can support all direct account payments, including bank and digital wallets.
A2A payments fall under two categories: the commonly known bank-to-bank payments – or online banking e-payments leveraging a multi-bank scheme (e.g., iDEAL) – and those powered by Open Banking. Traditional A2A payments also include push and pull payments. The former is utilised for sending one-off payments from one account to another, while the latter for retrieving payments from one account to another (e.g., direct debit).
Previously, A2A payments struggled with being a viable competitor against other payment methods in many markets – with exceptions such as the Netherlands’ iDEAL, Poland’s BLIK, MobilePay in the Nordics, MyBank in Italy, and Spain’s Bizum. With manual bank transfers, payers had to log into their bank accounts whenever they wanted to make a payment, whereas recurring payments required them to complete an extensive authorisation form. The UX was also disjointed when paying the first time: when signing up for a new subscription service, users had to make a one-off payment before their bank debit collection began. All in all, they weren’t substantially beneficial to consumers when compared to cards, which were more prevalent. As such, businesses were prompted to deal with high card processing fees and delayed reconciliation times. Open Banking technology and instant payments have helped strengthen the A2A payments realm. At its core, Open Banking is the process of banks and other financial institutions (FIs) opening data for those who consent to access, use, and share. The modernised banking infrastructure looks to increase competition and improve financial services, leveraging historically kept in-house data to create new, innovative products and processes. Consequently, businesses and customers alike can benefit from increasingly efficient financial tools, the ability to automate payments, and more visibility over their finances. Effectively, Open Banking elevates A2A payments, enabling their usage at the point of purchase instead of card payments and bringing forth increased speed and simplicity, free of manual data entry and intermediaries that would otherwise increase the cost of transactions.
In the EU, the European Payments Council (EPC) established the SEPA Payment Account Access (SPAA) scheme, which delineates rules, practices, and standards – set to enable the exchange of payment accounts-related data – and facilitates the initiation of payment transactions in the context of value-added services provided by asset holders to asset brokers. SPAA also aims to address the challenges brought forward by the full implications of the revised Payment Services Directive (PSD2), namely, to unlock the opportunities of open data access, whilst ensuring banks are incentivised to maintain APIs and real-time payments infrastructure.
The payments sector is moving to real-time payment rails, furthered by consumer and merchant demand for increasingly fast, efficient, secure, and cost-effective payment solutions. Whilst the market has been dominated by cards, changing consumer behaviour and the demand for real-time payments have prompted even well-established card networks like Visa and Mastercard to adapt. Mastercard is actively building on core real-time payment rails, while Visa is focused on developing overlay services through acquisitions of companies like Tink or Currencycloud. Governments and other players are putting significant effort into improving core payment infrastructures. Such is the case in the UK, where a programme is underway to refresh Faster Payments, a real-time payment system launched in 2008, with new technology and architecture. The system operator of Faster Payments, Pay.UK, will ensure the delivery of the New Payment Architecture (NPA) for the UK, which includes the introduction of instant payments with improved transparency and instant settlement and clearance.
EPC also introduced SEPA Instant Credit Transfer (SCT Inst) in November 2017, supporting money transfers of up to EUR 100,000 between participating banks or PSPs in the SEPA area in real or near real time. Apart from offering a fast settlement, with most SCT Inst transactions processed in seconds, they are also available 24/7/365. In March 2024, a regulation on instant payments was published in the Official Journal of the EU, prompting PSPs within the Eurozone to accept incoming SEPA instant payments in nine months following the publication, and 18 months for sending outgoing payments. By 9 January 2025, PSPs should be equipped to receive EUR instant payments, and by 9 October 2025, they will need to manage outgoing instant payments.
In the US, A2A rails’ adoption is mainly incentivised by costs, as the interchange fees associated with card payments are not limited, and therefore high. The primary A2A rail in the region has been the Automated Clearing House (ACH) network, offering cost-effective transactions, although the confirmation time is longer. ACH has been integrated with several well-known platforms, such as Venmo, and is often used to decrease costs and boost margins. The introduction of the FedNow system in 2023 is expected to contribute to an evolution in this space, as it can offer both low fees and instant settlement. FedNow can also replace ACH in multiple use cases, being a more secure rail due to real-time payment confirmation. The European space contrasts the US in that the cost of card payment processing is significantly lower, and businesses are not as concerned with their processing due to the limited impact on their bottom line. Consequently, A2A payments in the region must focus on other use cases than cost reduction. Among the most notable are high-risk businesses, industries with high chargeback rates like egaming or betting, which already benefit from A2A payments through Open Banking. Other important use cases for A2A payments are high-value transactions, utilities, and other recurring bills.
Whilst Open Banking payments are not yet recurring in Europe, the industry is working towards this, with the most widely adopted A2A payment method in the region being direct debit, which offers ease of use and reliability in recurring transactions. Its decreased cost and low friction for users when initiating recurring payments have made the solution widespread. This increased adoption is highlighted by the fact that even big companies that deal with high numbers of single-time payments, such as Amazon, have adopted direct debit as a payment method in Europe.
Some interesting A2A payments-related developments in the region are those of Bizum and the European Payments Initiative (EPI). A joint project between the Spanish banking sector, Bizum is an A2A payment method that enables instant transactions through a mobile device. Users can send and receive money to and from anyone – with no need to know the account number –, make online purchases, split expenses, and make donations to NGOs. It aims to be a universal, simple, immediate, and secure payment method. Similarly, EPI was launched by 16 banks and financial services companies to create a new digital wallet, namely wero, and a unified A2A solution. It aims to become a new payment standard for European merchants and consumers across all retail transaction types, in-store, online, and P2P. An instant payment solution, wero will be integrated into EPI’s member banks’ apps and launched as a standalone app, first in Belgium, France, and Germany, followed by the Netherlands and other countries in the future. EPI’s acquisition of iDEAL in the Netherlands and Payconiq International in Luxembourg is also set to support its plans to deliver a unified instant payment scheme and platform for Europe.
Moving onto Latin America, A2A payments made up 20% of total ecommerce transaction value in 2023. In the region, Brazil stands out, as A2A payments have developed and spread widely, primarily through the Pix system, introduced by the Central Bank of Brazil. Its benefits are cost-effectiveness, instant settlement, and strong authentication. Whilst widely successful, an important pain point of the payment method is its inability to handle recurring payments efficiently, as it requires strong authentication for every transaction. The Central Bank is addressing this through a series of new developments, such as: Pix Agendado – ‘scheduled Pix’ – a transfer scheduled by the payer (person or business) to take place on a certain date; Pix Agendado Recorrente – ‘recurring scheduled Pix’ – a transfer scheduled by the payer to be made at certain intervals with fixed amounts (e.g., rent payment); Pix Automático – ‘automatic Pix’ – set to be launched in October 2024 and designed to democratise the population’s access to recurring payments; and Pix Internacional – a connection between Pix and RTP or A2A cross-border schemes.
The APAC landscape is defined by the prevalence of real-time payments and interoperability. Real-time payments in the region are varied and influenced by country demographics, economic policies, and technology adoption. China launched its real-time payments system in 2010, the Internet Banking Payment System (IBPS), to strengthen its banking infrastructure and further non-cash payments. In 2021, it ranked as the second country worldwide in terms of transaction volume of real-time payments. Another notable mention is Australia with its New Payments Platform (NPP). In Southeast Asia, Singapore and Thailand launched QR code-based real-time retail payment systems – PayNow and PromptPay. In India, UPI is a real-time payment solution that enables interbank transactions. It was developed and launched by the National Payments Corporation of India (NPCI) in 2016, and it quickly became the preferred payment solution, with over a billion monthly transactions. At its core, it supports money transfers between bank accounts, adding multiple accounts into a single app and enabling transfers and merchant payments from one place. It also allows P2P and peer-to-merchant (P2M) collection requests, which can be scheduled and paid as needed.
On a global scale, it is evident that A2A payments are on the rise, furthered by the ongoing prevalence of Open Banking, increased real-time payment connectivity, and supportive regulatory frameworks. Businesses can benefit from integrating real-time A2A options – from enhanced cash flow management and reduced payment costs to zero chargebacks. Furthermore, Open Banking-enabled A2A payments help brands increase conversion.
The payments landscape transformation, driven by technology and changing consumer preferences, requires ecommerce players to align with evolving payment dynamics – tailoring payment journeys for international customers, implementing advanced omnichannel solutions, and including real-time A2A options into their payment offerings. Businesses should understand and embrace these trends to maximise revenue and optimise performance, ultimately boosting customer loyalty and retention on a global scale.
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.
Estera Sava is a Content Editor at The Paypers, bringing her expertise in content creation and editorial processes to the Payments & Commerce team. With a focus on the ever-evolving ecommerce payments landscape, she is actively involved in various high-impact projects and industry reports. Through her proactive approach and dedication, Estera helps drive the success of The Paypers' initiatives.
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