The European Payments Initiative recently released a report stating that A2A payments are going to spike usage in the next few years; which begs the question,
what are A2A payments and how to they differ from other digital payments methods?
A2A payments, short for account-to-account payments, are the transfer of funds from one bank account to another bank account. These transactions differ from other payments methods in that they do not require an intermediary to be processed, like a card.
A2A payments are often made between accounts held by the same person. These payments are also used to move money to and from digital wallets. Direct debit payments are also a form of A2A payments.
A2A additionally can take shape in one of two ways: ‘push’ payments and ‘pull’ payments. The former is when one account ‘pushes’ funds to another, for example when you move funds from your digital wallet to your savings account. The latter is when funds
are ‘pulled’, such as when direct debit is taken from your account to pay for a utility.
A2A payments are open banking linked transactions that ease the seamlessness of the transaction journey. This provides users with a frictionless experience, without the need for intermediaries that require authentication, or inserting card details to complete
a transaction. Using API-enabled A2A payments makes payments instant and hands-off.
The financial institution facilitating A2A payments needs to have instant payment capabilities in place for the transaction to go through. Funds should be transferred and be available in the other account instantly. While many digital wallet platforms have
A2A payments available, many still use card payments or ACH transfers.
A2A payments allow users to transfer funds from their checking accounts to their brokerage accounts right away if they need to make investments, whereas in the past, transactions between accounts held by the same consumer would take several days.
The A2A revolution
While there is certainly a leap towards A2A payments being made in Europe, there are businesses popping up all over the world that are honing into the potential of A2A transactions. There are multiple fintechs that specialise in A2A payments, such as Pix
in Brazil,
Aeropay in the US,
Prometeo in Latin America, and UPI in India.
Pix and UPI are widely used A2A payment platforms, with billions of users. However, they have varying business models and operating styles, and while Pix uses banking platforms to access their users, India’s UPI uses third-party platforms such as Google
Pay. While these two platforms have different approaches to A2A payments, both are widely successful and it remains to be seen how other financial institutions and payments firms will take inspiration from these two companies and embark on their own developments
in A2A services.
Visa is planning to launch a model for A2A payments in the UK for 2025, which will aim to revolutionise how bills and subscriptions will be paid for in coming years.
Claiming that millions of pounds are lost to due to auto-renewals and lack of flexibility around bill payments, this initiative will use A2A to manage these payments in a faster, easier fashion.
Account to account payments have been fragmented – the point of sale is not as established as credit card transactions, and A2A payments are not yet seen to be as reliable as other, more commonly used payment methods.
While the A2A revolution is on the horizon in Europe, there still needs to be standardisation among banks in connecting open banking and instant payment systems, and facilitating an overlay of services such as QR code payments and Request to Pay.