The rollout of the PSD2 directive opened up a secure way for consumers to share their financial data with merchants and to authorise payments directly from their bank account.
Account-to-account payments, or A2A, are nothing new; bank transfers have existed for years. However, the benefits of open banking and real-time money movement have, for the first time ever, allowed A2A a genuine opportunity to rival card payments for everyday transactions.
The payments industry is bracing for a cardless future where account-to-account payments become the new standard. The Worldpay Global Payments Report has predicted that by 2023, A2A payments will account for 20% of all e-commerce payments in Europe (and therefore will surpass card payments).
Bypassing the card network and payment processing intermediaries could potentially mean tens of billions in cost savings every year -- and that’s a huge incentive for retailers to help accelerate the shift to A2A.
So let’s see what the transition actually entails for merchants and their customers.
General overview: what is bank account linking?
Bank account linking is an account-to-account payment feature that allows customers to link their accounts with a merchant's account. Payments after the linking can then be executed without the need to enter card details or perform additional confirmations. A merchant’s account is connected to a customer’s account and enables faster, safer and cheaper online payments.
Bank account linking is made possible by open banking APIs (application programming interfaces), which allow various pieces of software to communicate in realtime. At the time of checkout, A2A payments can be initiated through APIs, enabling money to move between the two accounts and offering speed and convenience without adding to the cost of transacting.
How does bank account linking work?
Bank account linking is a pretty straightforward solution to implement.
One of the biggest advantages for merchants is the super streamlined one-click payment functionality. At the time of checkout, customers are offered to link their bank account. If they accept, every payment after the connection becomes a simple, one-click payment.
Not only does the feature help to engineer a ‘zero friction’ shopping experience that improves key business metrics such as conversion and bounce rates, but it also adds to the brand’s credibility and boosts consumer loyalty. For business owners who think digitally first, this could unlock significant growth opportunities.
The actual linking of the bank accounts takes no more than 10 seconds, making the transactions smooth and efficient. Additionally, the fact that no card or CVV number is required to initiate online payments means consumers get greater protection against fraud – a benefit few would want to pass on.
Lastly, customers don’t need to leave the merchant’s site or application to initiate the payment directly from their bank account. Everything happens in the merchant’s payment environment.
Leveraging A2A payments allows merchants to create a safer shopping environment, as customers are required to authenticate each payment through their banking app.
In short, the account linking works as follows. The customer
- Navigates to the checkout page
- Selects payment via bank account
- Authenticates the connection via their banking app, control code or Smart ID
- Adds their bank account to the payment options
- Next time, the customer can initiate a payment with the same merchant with one click*
* The account token is valid for 90 days.
The benefits of account linking for e-commerce merchants
A2A payments have numerous benefits for both merchants and consumers – let’s have a look at them.
Account linking benefits for merchants:
- A better customer experience will help you earn more. Adding a one-click payment option to the checkout experience helps merchants simplify online payments and drive more purchases. As no card details are shared or need to be re-entered, customers can shop safer and faster without any added steps.
- Money comes through faster. With traditional methods, it can often take a while, sometimes as long as several weeks, until the payment reaches the merchant’s account. However, as bank linking eliminates all intermediaries and third parties, payments are processed and transferred much faster.
- It's more cost-effective for businesses. Bypassing the card network opens up huge savings opportunities for online merchants. As money starts moving directly between bank accounts, merchants don’t need to cover any card or payment processing fees, which can save them up to 7% per transaction. Skipping the middleman with A2A payments lets businesses keep more of the profits.
- More security, less online fraud. Account-to-account payments are tightly secured with strong customer authentication (SCA), helping merchants avoid fraudulent payments. The beauty of bank account linking is that it creates zero friction for the customer – no extra authentication layers are added to meet the SCA requirements, as shoppers approve payments directly from their banking app.
Overall, bank linking is a superior way to meet the changing needs of consumers when it comes to making payments. While there is an accelerated shift to more innovative, faster payment methods, consumers are also clear they want more security and convenience. And with bank linking and A2A payments, businesses can finally offer a friction-free experience that benefits everyone.
Change the world of payments with kevin.
kevin. offers first-of-its-kind cardless payments solutions for online and offline merchants. Our fully customisable and PSD2-compliant payment infrastructure supports merchants in creating a safer, faster and more convenient payments environment – and all while making significant savings for merchants. Does a cardless future excite you? Speak to us to learn how you can change the world of payments today.
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