Account-to-Account (A2A) Payments - Understanding Their Impact

Posted on October 5, 2023
Understanding A2A Payments

Payments are big business. In 2022, revenues from payments totalled more than $2.2 trillion globally, reaching an all-time high. Paper and plastic are making way for account-to-account payments. And along with them, all the advantages they bring. With all of the changes in the payments industry, one might assume account-to-account bank payments are a relatively new phenomenon; in reality, they've been around for decades.

So why are we seeing such a buzz in conversation about them?  Here are 3 good reasons why account-to-account payments are seeing a serious uptick.  

  1. The rapid adoption of contactless payments worldwide. No surprise here; cash usage has gone down 20%, and those paper checks?  In 2022, 45% of Americans didn’t write a single one. 
  2. Payment technology infrastructure has made incredible strides towards an open finance economy. 
  3. The launch of FedNow and RTP in the U.S. alongside Canada’s soon-to-launch Real-Time Rail (RTR) payment system, bringing real-time payments to North America. 

What is an A2A Payment?

Account-to-account (A2A) payments are the direct movement of funds from one bank account to another. Because they bypass intermediaries like credit cards and payment processors, A2A payments can quickly settle in the recipient's account without needing third-party authorization.

A2A payments are sometimes referred to as ‘Me-to-Me’ banking due to its primary function of allowing customers to transfer money between different accounts owned by the same user. However, A2A payments can also be made from ‘Me-to-You’ and ‘You-to-Me’ and can be used alongside digital wallets to transfer money and pay bills. 

Account-to-account payments, or A2A payments, are simply another name and or acronym for bank account payments.  Not to confuse the reader, but bank account payments are also referred to as EFT payments in Canada or ACH payments in the US. All these terms refer to the direct movement of money from one account to another, something that has been around for a long time.  What is different is the technology, innovation, and digital transformation around them—more on that in the growing demand section below. 

Types of A2A Payments

There are two types of A2A payments. 

1. Push (send) payments

Push payments involve the sender or the customer initiating the bank payment transfer to a recipient. The payer is in control, pushing funds to another account. Push funds are what companies use to pay employees or suppliers. Another example, for instance, is when a lender funds a loan. They initiate the payout to the customer.  These are all push payments. 

2. Pull (receive) payments

With pull payments, it is the recipient in control. In many examples, this is a business such as a bank or utility company that has the ability to "pull" funds from customers’ accounts, and customers grant permission for this to happen. This can be illustrated when the same lender from above is looking for loan repayment. They would be pulling the funds from the borrowers’ accounts. Subscription-based businesses deducting funds from linked bank accounts are also examples of pull payments. 

A2A Payment Type Use Cases

  • Peer-to-Peer (P2P) - splitting the cost of a restaurant bill among friends 
  • Business-to-Business (B2B) - paying suppliers for raw materials or services rendered
  • Business-to-Consumer (B2C) issuing payroll, paying out insurance claims
  • Consumer-to-Business (C2B) - paying for a subscription service
  • Me-to-Me - moving money between personal bank accounts for savings or investment purposes 

Why Demand Is Growing For Bank Account Payments 

The truth is there are many factors at play here. Spurned on by the pandemic, the payment space has evolved dramatically in the last few years. The culmination of consumer preferences, the embracement and advancement of digital technology, and the need for regulation have all become interwoven.  

As the global economy becomes increasingly digital, digital payments are expanding at a growth rate not seen before. The Global Payments Report 2023 estimates that account-to-account payments represented an estimated US$525 billion in 2022 e-com transaction value alone. A2A payments are projected to grow through 2026, resulting in a global e-commerce market size of nearly $850 billion.

PWC’s 2025 Payments and Beyond report explains the six macro trends we can expect to affect how the payment space will continue to unfold and illustrate how bank account payments fit in. 

1. Inclusion and trust

2. Digital currencies

3. Digital wallets

4. Battle of the rails

5. Cross-border payments

6. Financial crime

While A2A payments have existed long before the digital age, the advances in payment API technology, open banking, and end-user experience are driving up demand. In fact, in 2022, the U.S. moved 5.94 billion dollars in B2B payments alone. 

At the intersection of these three key components, account-to-account payments are suddenly morphing into a comprehensive payment solution.

Traditional A2A payments running on legacy payment rails can not hold a candle to what third-party payment providers can now offer.

Consumers are drawn to A2A payments by their safety, simplicity and speed. A new customer signing up for a fintech app now expects to instantly fund their account by linking it with their bank account. In the past, connecting accounts for A2A payments was done with voided checks or confirming account numbers through microdeposits. Thanks to advancements from tools like Open Banking platforms like Flinks Connect, account verification can now happen in as little as seven seconds.

In an effort to expand the availability of instant payments in the United States, the country's Federal Reserve banks developed FedNow, a new instant payment system. The success of FedNow will depend largely on its ability to collaborate with banks and fintechs to create a payment value chain by reducing friction, increasing speed and enhancing security.

6 Compelling Reasons for Account-to-Account Payment Technology

1. Cost Effective

Hands down, bank account payments are the most cost-effective payment method compared to credit cards, wire transfers, or checks. It is not just about the lower transaction fees but about every single cost associated with processing payments. As we outline further below, with payment API-driven bank account payments, pretty much every financial operational cost will decrease. 

Account-to-account payments solve expiration date and credit limit payment failures, not to mention the high cost of credit card transaction fees. The cost savings go beyond the chargebacks, payment failures, and manual data input errors. 

2.  Reduced Manual Workload

Through a single API connection, bank account payment technology can alleviate anywhere from 25%-50% of the financial operation workload. The reasons are plenty. 

Introducing automation and intelligent payment infrastructure into processing payments reduces the burden of manual administrative tasks.  

  • Decrease the manual input and data entry errors from missing or wrong bank account numbers, routing numbers, or institution numbers.
  • Redirect FTE resources to more strategic tasks than following up on failed payments from everything like credit card expiration or insufficient funds. 
  • Manual .csv reconciliation. Reconciling payments to determine who paid and when is a full-time job. In some organizations, it is an entire department working forty hours a week.  Manual legacy payment processing costs are astronomical and guaranteed; many businesses aren’t even tracking it. 

For example, a business looks to process 1000 transactions that are all identical at $100. The most significant pain point for organizations is reconciling those transactions quickly and efficiently. Figuring out who paid and who did not pay is not easily discernible. This is all part of the manual work completed by the accounting team. 

With an embedded payment platform solution such as VoPay, however, the entire process is fully automated. A platform that can mirror the business’s financial transactions and orchestrate the payment data behind the scenes for a seamless payment data reconciliation.  It is this payment data orchestration that businesses need the most.

3. Recurring And Scheduled A2A Payments

In North America, credit cards have long since held the market share when it came to recurring and scheduled payments; however, in most recent years, companies have begun to come around to see the value of account-to-account payments. 

In comparing EFT and ACH payments as an alternative to credit cards - bank account payments through a payment API connection deliver the same ease, convenience, and safety as credit cards, including payment security tokenization.  With no human intervention on their end, businesses can securely capture, store, and tokenize customer payment information for scheduled and recurring payments. 

Use Case: For those collecting monthly subscription fees or payments, opting to collect with bank account payments instead of a credit card can not only save the processing fees for the end user, but also the chance of a failed payment transaction for the provider significantly decreases. 

4. Data-Driven Insights

In the realm of modern business operations, the value of Account-to-Account (A2A) payments shines brightly thanks to the wealth of data-driven insights companies suddenly have access to. With A2A payments, businesses gain a treasure trove of transaction data and behavioural patterns. Through advanced payment analytics and robust reporting tools, this data empowers companies to delve deeper into customer behaviour, discern payment trends, and unveil revenue patterns that might have otherwise remained hidden. This data-driven approach isn't just an advantage; it's a strategic necessity in today's competitive landscape.

By harnessing the insights derived from A2A payments, businesses can: 

➡️Make more informed decisions 

➡️Fine-tune their strategies to resonate with their target audience better

➡️Optimize pricing structures and pinpoint opportunities for growth

➡️Tailor products or services based on customer preferences become increasingly precise, ultimately boosting customer satisfaction and loyalty.

Bank account payments aren’t just facilitating a financial transaction; they are a powerful financial tool enterprises can use to navigate the complex currents of the market intelligently.

5. Cash Flow 

In an era where agility and adaptability are paramount, A2A payments provide the financial backbone that businesses need to weather storms and seize opportunities with confidence.

For businesses, monitoring cash flow as it ebbs and flows in real time is akin to having a financial compass that points toward stability and growth. A2A payments allow companies to anticipate revenue streams and track expenses with precision, allowing for proactive decision-making that prevents cash shortages and ensures the consistent availability of working capital.

6.  Enhanced Security

Security is paramount in today's digital age. VoPay leverages the robust security measures inherent in the banking industry to ensure safe, encrypted transfers of funds. VoPay handles the due diligence surrounding customer and client onboarding and KYC; risk intelligence is built into our solutions with bank account authentication and verification. Tokenization adds a layer of security to sensitive payment information, such as bank account details, protecting sensitive data by replacing it with a unique and randomly generated number.

Get Started With VoPay’s Bank Account Payment Technology 

The modern business environment relies on various software and technology solutions to operate efficiently, and the need for updated payment technology is no exception. 

By integrating VoPay’s financial technology into existing systems, such as accounting software or ERP systems, your customers get an all-in-one financial solution, including intelligent A2A payment technology that exceeds their expectations.

Book a consultation today!

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