A new study has revealed that A2A payments (Account-to-Account) are poised for rapid global growth, with transaction volumes expected to rise from 60 billion in 2024 to an astounding 186 billion by 2029, marking a 209% increase.
A2A payments, which involve direct bank-to-bank transfers without intermediaries, have gained significant traction due to their instant settlement capabilities and lower transaction fees compared to traditional payment methods like credit cards.
Open Banking Driving A2A Innovation
One of the key factors fuelling the growth of Account-to-Account payments is the development of Open Banking.
Through Open Banking, customers can authorise third-party providers to initiate payments directly from their bank accounts, enabling solutions like Variable Recurring Payments (VRPs).
VRPs allow consumers to connect payment providers to their accounts and manage recurring payments within agreed limits, offering more flexibility and transparency than traditional direct debit arrangements.
“VRPs provide a service not easily replicable beyond A2A, boosting A2A’s potential,” says Matthew Purnell, the research author.
“Vendors must capitalise on this opportunity and offer merchants A2A-specific solutions that enhance consumer payment experiences like VRPs, improving satisfaction and rewarding repeated payments.”
A2A Card-Dominated Markets
A2A payments are also making inroads into traditionally card-dominated markets, such as the US.
With the launch of FedNow in 2023, A2A transactions in the US are becoming more viable for businesses, particularly due to their cost-efficiency.
FedNow’s average transaction fee of 4 cents is significantly lower than the 3.5% average fee for card-based transactions, making it an attractive option for businesses looking to reduce processing costs.
As A2A adoption increases, these payments could disrupt the US market, particularly among businesses seeking to reduce their reliance on high-fee card transactions.
The report anticipates that as use cases and adoption expand, A2A payments will grow in popularity, providing a cheaper, faster alternative to credit and debit cards.
The Rise of A2A in the UK
In the UK, A2A payments are expected to grow by 212%, reaching $235 billion by 2027.
The lower transaction fees associated with A2A payments, as low as 0.35% per transaction compared to the 4% typically charged for card payments, are driving interest from businesses, particularly small and online retailers.
With instant settlements and reduced fees, businesses are increasingly viewing A2A as a cost-effective payment method.
However, A2A adoption within e-commerce remains relatively uncommon, though this is changing rapidly.
Payment Service Providers (PSPs) are starting to onboard A2A solutions for online checkouts, further promoting the benefits of A2A, including fraud protection tools and instant refunds.
Overcoming Barriers for In-Store A2A
Despite the advantages of A2A payments, adoption in in-store transactions remains limited, particularly in the UK.
While businesses benefit from the cost savings, consumers are less incentivised to switch from credit cards, which offer perks such as rewards and cash-back options.
For in-store A2A payments to succeed, vendors must work with banks to provide incentives that make this payment method more appealing to consumers.
As A2A payments continue to evolve, the future of global transactions looks set to shift towards faster, cheaper, and more transparent solutions.
By partnering with PSPs and incentivising consumers, A2A vendors have the potential to transform the payments landscape, offering businesses and consumers alike a seamless and efficient alternative to traditional payment methods.
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