We are sure you have heard the saying “data is the new oil.” Now imagine applying that concept to payment or finance “data and adding in the idea of real-time. Get the picture? If not, that’s ok; we can fill you in. This article provides businesses with the background on account-to-account (A2A) payments, why they stand out as a payment method, and concludes with the big win, the ways they unlock the value of real-time data.
Account-to-account payments transfer funds directly from one account to another without a “middle man.” Thus, no intermediaries or payment mechanisms like credit cards are involved in the transaction. It moves straight from one account to another.
With Open Banking in place, account-to-account payments connect directly to the bank through an application program interface (API). While not necessarily new, A2A payments have fast become the “new kid on the payment block.” More recently, they have notably gained traction in North America.
For instance, Canada saw 2.9 billion account-to-account (A2A) transactions worth a cumulative $5.1 trillion in 2020 alone. Not to mention the significant uptick noted in the U.S. as well.
There are several reasons we are seeing account-to-account payments take center stage. Firstly, and most obviously, the world’s immediate shift to contactless payment methods played a significant role. Secondly, in North America, financial technology and its embracement are making great strides. And lastly, the imminent arrival of Open Banking and real-time rails deliver superhero powers to the account-to-account payment scape. With A2A payments on the rise, it’s become clear, merchants and consumers are embracing them.
A2A payments stand out
Digital technology has increased the importance of electronic payment methods. As a result, businesses look to capitalize on the digital ways of paying and getting paid.
Today’s consumers and businesses want a one-stop shop. They need a fluid and simple payment experience, or they will head somewhere else. Hence, account-to-account payments have become an excellent opportunity for companies to enhance the customer journey while reaping their numerous benefits. A2A payments tend to be more nimble than most payment options. They are a faster and more flexible way to pay. And as the demand for contactless, frictionless and speedier payments continues, these guys fit the bill.
The A2A advantage
- Eliminate Credit Card Fees Remove the “middleman,” and you remove the costs in return. Add in the magic of an API where a business can connect directly with the bank, which delivers significant savings. This means no credit card processing fees. Further to this, A2A payments solve a significant business pain point. That credit card expiration date businesses often encounter? With account-to-account payments, that becomes a thing of the past.
- Faster Money, Faster Data With A2A running on new payment rails, speed is the outcome. When data moves alongside those funds, B2B transactions gain the upper hand. From accounts payable (AP)to accounts receivable (AR) and all the way up to the boardroom, real-time data enables strategic decision-making.
- A2A is Adaptable A2A payments 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) such as accounting and billing software solutions
They unlock real-time data
At the beginning of this article, we mentioned this decade’s trendy phrase, “data is the new oil.” We have all heard it before; however, businesses may not have yet correlated how this fits in the payments space.
Not to mention the bonus, alongside real-time payments comes real-time data.
What is real-time data?
Real-Time Data: Real-time data (RTD) is information that is delivered immediately after collection. There is no delay in the timeliness of the information provided.
In effect, we will have end-to-end communication taking place by introducing real-time rails. We are talking about bilateral communication, which includes notifications of confirmations, invoice information and settlements.
Why is real-time data essential?
It enables immediate action. It allows businesses to be proactive by seizing opportunities or preventing problems before they happen. By comparison, the batch-style method of ‘after the fact’ data processing relies on reports. Once that happens, data collection and analytics can take hours or, in some cases, days to show important flags or results.
A real-time data example
A business owner receives a check for $300 from a client. In a manual world, the data attached to this check is simply a name and an amount. What you see is what you get. There is no visibility into any of the accompanying A/R data. Not to mention the fact that the business has no visibility into clarity if the payment will clear when processed.
Now consider this from a payee’s perspective. The payee sent the check. Their piece of the transaction is complete. However, they don’t know when to expect the money to come out of their account.
Now multiply this experience or a slight variation on the above by every client and vendor, and what businesses end up with is no clear grasp on where their cash flow sits on a day-to-day basis.
And if companies don’t have a complete picture of cash flow, how can one make those critical strategic decisions required in real-time? It is for this very reason that real-time payment data has become vital.
Account-to-account transactions allow enterprises to connect and engage with real-time data. Hence, cash flow becomes more manageable, business risks are reduced, and immediate insight into customer behaviour and preferences is available.
With Open Banking set to arrive in 2023, the trend is fast moving towards real-time processing. And as the adoption of real-time payments flourishes, enterprises will significantly benefit from the transparency of the network and the data attached. As a result, this will allow them to make more strategic decisions and deliver better systems.
VoPay account-to-account payments
Manage the entire cycle of money movement from payment and approvals to reconciliation and accounting.
Unlock the power of real-time data with iQ11
Account-to-account payments become instant, like a credit card. But without the fees. VoPay’s iQ11 service offers same-day EFT processing with complete visibility into each transaction’s lifecycle and advanced bank account verification and reconciliations. With Open Banking payment technology, we can verify and validate account ownership, available balance, account information and account performance history.
Learn more about how VoPay can help your 2022 business goals.