With the rise in popularity of anything digital, the world has seen an increase in the use of digital payment methods. Such methods include using QR codes and digital wallets such as ApplePay. Combined with digitisation, COVID-19 forced merchants to radically rethink payment strategies, with 1 in 4 merchants saying that accessing new online payment tools is a priority. Account-to-Account (A2A) Payments is becoming a popular payment method. With the rise in real-time payments and innovation in open banking, A2A payments are becoming the preferred choice of payment. The World Play Global Payments Report predicts that by 2023, A2A payments will account for 20% of all e-commerce payments in Europe. Traditional bank transfer services have existed and have been adequate thus far. Nevertheless, with open banking and real time payments on the rise, A2A payments is challenging traditional card payments. As such, further studies show that 40% of online payments will be done through A2A mechanisms.
What are Account to Account Payments?
A2A payments move money directly from one account to another without the need for intermediaries like payment infrastructures or cards. Such payments support all direct account payments such as banks and digital wallets. A2A payment rails are the networks that enable the movement from one account to the other – the tracks that power A2A payments. In 2020, the number of contactless payments in the UK increase by 20% to 9.6 billion payments. This drove growth in A2A payments, with 51% of B2B payments made via A2A payment networks. As A2A payments are likely to replace card payment as consumer and businesses preferred payment methods, 80% of central banks have invested in payment rails and networks. As we live in a digital-first society, there is an imminent need to keep up with emerging technology and payment expectations, leading to the decision by the central bank to invest in payment rails.
There are two types of A2A payments; push payments and pull payments. Push payments involve the transfer of one off payments from one account to the other such as payments and bank transfers. Pull payments occur when businesses withdraw money from customer accounts in the form of subscription payments and direct debit mandates. As aforementioned, open banking fuels A2A payments. Open banking uses APIs which enables the direct movement of money from payer accounts to the merchant. Gartner predict that by 2030, over 50% of B2B transactions will be performed by real-time APIs. Such APIs make it easier to access bank clearing systems and embed account-to-account payments at the point of purchase. As such, payments made from open banking is estimated to grow at 78% per year in the EU.
Benefits of Account to Account Payments:
With the ability to transfer from account to account without the need for intermediaries, A2A payments offer a friction-free experience, with an infrastructure that supports instant and recurring payments. Given that traditional payments are unwanted, outdates and don’t have the same advances as A2A payments, they are challenging the dominance of traditional cards. A2A payments meets the changing needs of consumers, providing convenience. This can be seen with China’s WeChat Pay, where people can transfer money to their contacts in the social network. Such method of payment is accepted by 73 million merchants, saving time for consumers. Open banking APIs have helped A2A payments achieve greater reach and accessibility. Faster account-to-account payments facilitate B2B and P2P transactions, mobile payments, as well as international payments. Such method of payment is attractive to consumers as refunds are settled immediately instead of taking several days, and payments can be made 24/7, with speed, simplicity and security.
Fraud in e-commerce transactions is a huge problem across Europe. Card payment fraud causes $24 billion in losses per year, and is only increasing due to the lack of high security payment options. As A2A payments are fuelled by real-time payments and open banking, the risk of both fraud and failed payments are reduces. Open banking technology increases the security of transactions, as it allows for multi-factor authentication requirements. Furthermore, A2A payments allows for merchants to future proof their payment acceptance strategy. A2A payments are 90% cheaper for merchants, allowing merchants to experience efficiency, less intermediaries, lower costs and points of failure, as well as improved checkout effectiveness and conversion.
