Instant payments are surging in popularity worldwide, and are set to become the norm in the next couple of years.
Open Banking-powered account-to-account (A2A) payments, which take advantage of the growing number of real-time payment systems around the world, are expected to become the future of financial transactions.
They offer the speed and convenience that consumers receive from other digital experiences, whether that’s ordering food or a shaving subscription, and now expect from their payments as well.
But what exactly are A2A payments, and how will they impact your business?
A new payments playing field
A2A payments are best described as direct electronic fund transfers from a buyer’s bank account to the seller’s bank account.
The concept has actually been around for a long time – ‘traditional’ A2A payments include push payments, such as bank transfers which require consumers to manually send money to another account, and pull payments, such as automated recurring debits to pay a bill (think Direct Debits).
However, this first iteration of A2A payments came with inefficiencies. With manual bank transfers, for example, payers had to log into their banks accounts whenever they wanted to make a payment, and for recurring payments, they would often have to fill in lengthy authorisation forms. As a result, they weren’t substantially beneficial to consumers when compared to cards and other established payment methods.
Open Banking has now changed the game and strengthened the A2A payments proposition.
At its heart, Open Banking is all about using application programming interfaces (APIs) to provide more accessible services and more efficient financial tools. These APIs have enabled the direct, and instant, movement of money from a payer’s account to a merchant’s bank, elevating A2A payments by bypassing traditional payment rails and enabling their use at the point of sale (POS), with immediate settlement in a recipient’s account.
Unlike the previous iteration of A2A payments, these instant A2A payments don’t require the manual transferring of funds, which is prone to inputting errors, or merchant authorisations, which can be particularly time-consuming.
A global game
The Open Banking environment has also supported the emergence of innovative new payments players, such as Swedish platform Zimpler.
Earlier this year, we announced a strategic partnership with the company. With the new direct integration to Zimpler, payabl.’s merchants can now offer their customers the option to pay via instant bank transfers at checkout. Zimpler initiates A2A payments using Open Banking APIs, which removes intermediaries and results in faster and more cost-effective transactions for merchants.
Payments providers like Zimpler have contributed significantly to making instant payments more widely available to merchants and their customers. Indeed, recent data from Juniper Research states that the global instant payments market will grow by 161% to surpass $58 trillion globally by 2028, fueled by the growing popularity of new A2A payment options, such as Zimpler and iDEAL in Europe, UPI in India, and PIX in Brazil.
In the US, meanwhile, McKinsey has highlighted that consumer-to-business payments remain a key target for A2A payments, predicting that US A2A payments (consumer purchases made remotely at the POS and excluding any type of bill payments such as utilities) could surpass $200 billion in volume by 2027.
It’s becoming very clear that A2A payments are on the rise globally, supported by the increasing adoption of Open Banking schemes, increased real-time payment connectivity, and supportive regulatory frameworks.
Bringing the benefits to your business
The rise of A2A payments is a key feature of today’s evolving payments landscape, where transformation is being driven by technology and changing consumers preferences.
Businesses with an eye on expansion will now need to align with these new dynamics, tailoring their payment journeys to include real-time A2A payment options. It’s important to first understand – and then embrace – such trends to maximise revenue and enhance customer loyalty.
The good news is that A2A payments are primed to unlock a host of benefits for your business – and your customers.
Open Banking has revolutionised A2A payments by automating much of the process, speeding up transfer times whilst improving transparency and enhancing security measures.
Your customers can now make A2A payments directly within their banking app with just a couple of clicks. They can swiftly complete transactions, which is particularly welcome when purchasing high-demand items, such as a new product launch or tickets to an upcoming sporting event or concert.
And as the merchant, A2A payments will accelerate settlement times, enhancing your cash flow, and eliminate those cumbersome data entry processes.
They are also low-cost, as they limit interchange fees. Additionally, A2A payments on real-time rails have a more robust authentication mechanism, requiring direct authorisation from the customer’s bank account to complete the transaction. This minimises both the risk of fraudulent transactions, as well as chargebacks.
At payabl., we’re working with pioneering providers like Zimpler and Yapily to bring these benefits to the merchants we partner with, and we will continue to monitor developments in A2A payments as they’re increasingly adopted around the world.