What are account-to-account (A2A) payments?
Account-to-account (A2A) payments, also known as account-based, online banking, or direct account payments, describe direct money transfers from one account to another. In simple terms, account-to-account payments mean the online payment moves directly from a payer’s bank account to a service provider’s or a merchant’s bank account without intermediaries such as debit or credit cards.
A2A payments have been used for a while now. Traditionally, consumers have used direct bank account transfers for payments specific to bank accounts, such as scheduling bill payments via direct debit. Open banking and real-time payments have opened new opportunities for A2A transactions.
Account-based payments are on the rise and are becoming more widely used daily. The benefits of A2A payment rails outweigh the advantages of card networks and have the potential to become a more popular online payment method than traditional card payments.
This guide contains all the most important information about account-based payments, including their types and benefits, that will help understand A2A payments better.
What are A2A payments?
Account-to-account payments are direct money transfers from one bank account to another. A2A payments enable money to travel directly without unnecessary intermediates such as bank cards.
Direct payments have many advantages, including reduced transaction costs, quicker settlement, enhanced security, etc. This payment method is becoming more popular since it improves online checkout flows by reducing the steps a shopper needs to take to make a purchase.
European Central Bank statistics show that direct debit payments are on the rise, and in some countries, such as Germany, they account for 43% of all non-cash transactions.
Types of account-to-account payments
Account-to-account payments can be of two types - push and pull. The first one covers manual money transfers, while the latter involves consented automated money withdrawals. Here is more information about each A2A payment type:
Push A2A payments are used for one-off payments that require payers to manually send money from their bank account to the recipient’s account. This covers bank transfers, for example, when a person needs to transfer money to a specific bank account manually.
APIs can also trigger push payments. They can send consumers a notification or an action prompt for a money transfer.
Open banking has enabled payment initiation service (PIS) providers to expand the use of push payments. For example, licenced payment service providers (PSPs) can initiate a single direct payment from the consumer’s bank account to the merchant’s account with the consumer’s consent.
This is a smart and convenient way for consumers to pay for goods or services both online and in-store.
Pull A2A payments happen when companies automatically withdraw money from clients’ accounts. This may be used in the case of a subscription or other recurring payments. To initiate pull payments from a consumer’s account, the account holder must provide explicit consent.
Examples of A2A payments
Direct bank payments have many use cases. Here are examples of the most common use cases:
- Peer-to-peer (P2P) payments — A2A transfers enable individuals to pay their peers directly from one bank account to another. These payments are often made via a mobile app or an online payment platform.
- Bank-to-bank payments — this example covers bank payments when funds are transferred from one bank account to another within the same financial institution.
- Bill payments — various service providers allow consumers to pay for services directly from their bank accounts using A2A payments. This payment method can help businesses collect payments faster, just as kevin. payment services helped Servico.
More and more companies are offering the direct bank payment method because it’s a convenient and secure way to transfer money. Moreover, direct bank payment flow eliminates unnecessary intermediaries, resulting in lower costs for accepting payments.
Open banking and A2A payments
Open banking enabled regulated third-party financial service providers to enter the market that was long ruled by legacy banks. Along with the European PSD2 directive, open banking has created new opportunities for financial institutions to offer innovative and more effective payment methods.
One such payment method is account-based payments. While these payments are not new, open banking has made them more technologically advanced and convenient for users.
In the past, to make bank transfers, users would have to log in to their bank accounts every time they wanted to make a payment. Recurring payments would require completing a lengthy authorisation form. Moreover, there wasn’t a unified system for initiating subscription payments, so the user experience would widely differ every time someone wanted to sign up for a new subscription.
For a long time, A2A payments didn’t offer any benefits that would outweigh bank card payments, so companies had to opt-in for expensive card network schemes. Yet, open banking has completely changed the landscape, and A2A payments are now offering many more benefits than ever before.
What are the benefits of A2A payments?
Account-to-account payments benefit both businesses and end-users. Here are the main advantages for each:
Benefits for merchants
- Great client reach — everyone with a bank account can use A2A payments. For example, kevin. helps accept payments online from over 350M consumers across Europe.
- Higher conversion rates — improved user experience and convenient checkout flow can increase client conversion rates. For example, after integrating kevin., an international sports goods chain, Decathlon has seen incomplete payments drop by 50%.
- Low transaction costs — card networks charge a set amount or a percentage for every transaction, which inflates transaction costs. Paying directly from a bank account eliminates card networks from the payment process and reduces transaction costs.
- Instant settlements — in countries where real-time or instant payments are available, the money paid from a bank account can reach the merchant in seconds. This is possible because the money doesn’t have to travel through unnecessary intermediaries such as bank card networks.
Benefits for consumers
- Focus on customer experience — regardless of whether the consumer is paying via a web browser or a mobile, they can enjoy a frictionless payment experience. Since cards are removed from the process, users don’t need to enter their card details. With kevin., consumers can simply link their bank account to the merchant’s app and pay with a single click.
- Robust security — A2A payments require strong customer authentication (SCA), which means that consumers must confirm their identity for most of their transactions. Multi-factor authentication for account-based payments reduces the risk of fraud. Meanwhile, card payment fraud still remains a common threat.
Are account-to-account payments safe?
Card fraud is a common issue across the world. Reports show that in 2019, fraudulent card transactions accounted for €1.87 billion in losses in Europe alone. Eliminating bank cards from the payment process means completely removing the risk of card fraud.
Account-to-account payments secure consumers from both unintended mistakes and active fraud. All A2A payments have to be confirmed with multi-factor authentication with some exemptions. The authentication requires consumers to take two out of three steps to verify their identity. This can significantly reduce the risks of payment fraud.
How to prevent fraud in direct bank payments?
To prevent fraud in A2A payments, payers should only transfer money to trusted payees. This mainly applies to P2P payments or manual bank transfers.
Generally, direct bank account payments are safer than other online payment methods because of the built-in security measures. Strong Customer Authentication (SCA) also ensures enhanced security of direct bank transfers.
In-store A2A payments
Account-based payments are not limited to digital transactions. kevin. has developed a unique solution that allows consumers to pay for goods and services directly from their bank account using a point of sale (POS) terminal.
Account-to-account payments for POS terminals mean that consumers can conveniently pay via their bank account in a store. Businesses that implement this solution can significantly reduce their transaction costs because they don’t have to pay any card processing fees.
Most importantly, this cutting-edge technology doesn’t need any extra tools or infrastructure. Businesses can use their existing POS terminals to start accepting A2A payments, while consumers can conveniently pay in the same way they always have.
The future of A2A payments
The future of account-based payments is promising. While this payment method hasn’t reached its full potential yet, experts predict that in 2023 it will account for 20% of European e-commerce payments and surpass card payments.
Moreover, according to research, over 60% of mobile banking users would be willing to adopt A2A payments if they were given a chance. Companies such as kevin. are working to ensure that businesses across Europe get a chance to use account-based payments to their full potential.
Enjoy the benefits of A2A payments
kevin. offers companies to provide their consumers with an option to pay via their bank accounts. This way, consumers can enjoy an improved customer experience, while businesses can benefit from an increased customer base, fair-priced transactions, and much quicker settlements.
Get in touch if you’re ready to offer your customers the payment method they want.