You’re going to hear a lot about account-to-account payments (A2A) in the coming years. Overseas, they are already causing disruption throughout the financial sector. In fact, according to the Worldpay Global Payments Report 2020, A2A payments are predicted to account for 20% of all e-commerce payments in Europe, surpassing both credit and debit cards by 2023.
What are A2A payments?
A2A payments are similar to P2P payments (here in Canada that typically means Interac e-Transfer). Essentially, A2A payments involve the transfer of funds from one customer’s account to another account at either the same financial institution or another one.
This is done through ACH or ATM networks. A2A moves directly from consumers to a merchant bank account with no go-between. Overall, they reduce friction and delivery at a much lower cost due to their efficiency.
Important to note: A2A payments aren’t necessarily new. Bank transfer services have existed for years, such as direct debit. Traditionally, consumers have used this service to schedule regular bill payments. However, through open banking and real-time payments, A2A has a genuine opportunity to become a credible rival to the card payment rail for everyday transactions. What has changed is open banking and APIs. Now, there’s the potential for open banking payments to reach anyone with a bank account, in a truly efficient way. Open Banking has helped A2A payments achieve greater reach.
Current state of A2A Payments in Canada
Canada has been a slow adapter of A2A payments. However, the financial services sector is undergoing a digital transformation which has seen banks move from legacy infrastructure to modern cloud-based technology. That said, payment rails, although evolving, largely rely on traditional card networks. And Canada as a whole is a heavy user of credit cards.
That said, Canada’s adaptation is expected to increase over the comings years due to:
- Increasing customer demand
- Growing regulatory push
- Improving market infrastructure
Benefits of A2A Payments
Credit Cards be Gone: Payments initiated through Open Banking are done via APIs connected directly to the bank, taking the card scheme operators and other intermediaries out of the equation. Think about the savings for the consumer and the business from not paying terminal fees (POS systems), credit card fees or interest.
Savings for Merchants: A2A is up to 90% cheaper for merchants. Ideally, these savings would also be passed onto the consumer and they’d be incentivized to switch.
Money moves Faster: While corporates can debate about which payment service is best–same-day ACH payments, EFT payments or otherwise–when it comes to B2B transactions, the movement of data alongside funds can be especially useful to accounts payable (AP) and accounts receivable (AR) departments.
A2A is Adaptable: A2A payments can move funds from one company’s bank account directly to the recipient’s account using a variety of payment networks. A2A transactions can also integrate with back-office systems like enterprise resource planning (ERP) and AP applications.
Ideally, these benefits will lead to a trend where the adoption of A2A payments might be driven by Open Banking regulations that allow customers to initiate payments on third parties platforms by linking their bank account thus enhancing the customer experience. The development of these projects is noticeable, as they plan to disrupt the current ecosystem where credit card schemes play an important role.
This has happened around the world, where A2A payments overpower credit cards: iDEAL in the Netherlands, Swish in Sweden and MobilePay in Denmark. Trustly is offering one integration to enable online banking e-payment acceptance in multiple countries. We will be watching how consumers and merchants embrace A2A payments around the world.
Where do we go from here?
Merchants need to adapt and consumers will embrace where we are headed with direct bank payments in the A2A space. Many in the industry are calling A2A payments an unstoppable force.
A2A Payments are routinely referred to as an alternative payment method, but over the coming years they’ll likely become a primary payment method. Here at VoPay, our main service includes account-to-account payment innovation. VoPay is the simplest way to bypass traditional payment methods and accept faster, lower-cost account to account bank payments.
Speak to a payment specialist today to find out more about our customized account-to-account payment services.