What are Account-to-Account (A2A) payments?

A comprehensive guide to understanding A2A payments.

Account-to-Account (A2A) payments are transforming how money moves. Bypassing intermediaries, such as credit card networks, A2A payments offer a seamless, cost-effective and secure way to pay direct from a bank account.

In this article, we cover:

1. What are Account-to-Account (A2A) payments?
2. What are the different types of Account-to-Account (A2A) payments?
3. What is Open Banking?
4. What is Account-to-Account (A2A) in banking?
5. What are some examples of Account-to-Account (A2A) payment companies?
6. What is the difference between A2A and P2P?
7. What is the Open Banking Account-to-Account (A2A) payment model?
8. How do Account-to-Account (A2A) payments via Open Banking work?
9. What are the benefits of Account-to-Account (A2A) payments?
10. What is happening with Account-to-Account (A2A) payments around the world?

1. What are Account-to-Account (A2A) payments?

Quite simply, Account-to-Account payments, or A2A for short, move funds directly from one bank account to another.

Such electronic payments have existed for 50-plus years in some countries. Think: direct credits, direct debits and standing orders. However, A2A payments have undergone a recent reboot for a couple of reasons.

Firstly, technology is speeding up money movement. So, funds arrive on account in real-time—that’s in seconds, not hours or days.

Secondly, Open Banking rules enable new, secure sharing of bank data, with customer consent. Plus, enables third parties to link to customers’ bank accounts using APIs. These factors are driving better A2A payments.

2. What are the different types of Account-to-Account (A2A) payments?

Account-to-Account (A2A) payments typically run on either traditional batch or real-time payment rails in the back end. This determines how money moves, among other things. Meanwhile, linking accounts to a mobile or web-based interface on the front end changes the front-end, customer-facing UX, as we explain below. 

Traditional A2A payments

Traditional Account-to-Account (A2A) payments are sometimes referred to as ACH payments. ACH stands for automated clearing house, the electronic network for processing transactions between participating banks and financial institutions.

Countries typically have two different domestic schemes: direct credit and direct debit.

A direct credit is a push payment initiated by the payer. It’s used mostly by businesses to pay wages and salaries and by governments to pay state benefits and pensions. It’s usually a batch system, where transactions are saved and grouped together for processing.

A direct debit is a pull payment initiated by the payee. Consumers set up payment instructions to allow utility, insurance, mobile phone companies and others to take regular payments direct from their bank account. 70% of retail bill payments in the UK are made this way. Again, it’s typically a batch system.

Real-time A2A payments

Real-time A2A payments are like traditional A2A payments, but faster. Payments are normally on the payee’s account within seconds.

 Each payment is processed individually, which makes it the opposite of batch payment systems from the 1960s/70s.

Real-time transactions also settle individually and irrevocably. That means payments are final and once processed, they cannot be recalled. Because of this – and as they’re typically ‘push’ payments – there’s no concept of a chargeback.

This is great for businesses, who cut the cost and admin overhead of dealing with disputed payments. But less great for consumers in card-loving countries, who may be used to chargeback protection.

Branded alternative payment methods (APMs)

Alternative payment methods (APMs) refer to any type of payment that isn’t card. This includes mobile wallets, bill payment options, prepaid vouchers and, yes, bank transfers.

Far from being ‘alternative’, these are mainstream payment methods in many markets, particularly for e-commerce purchases. For example, the Dutch bank transfer scheme iDEAL accounts for more than 70% of online purchases made in the Netherlands. And BLIK, a similar scheme in Poland, accounts for more than half of online payments.

These bank transfer schemes have devised a mobile and/or web-based customer front end, a common brand and rules, but back-end money movement is A2A.

3. What is Open Banking?

Open Banking describes a way of securely sharing data held by banks, if customers consent to this. Some countries mandate a standardized format for this data-sharing.

Better bank payment is just one of the stand-out use cases of Open Banking. This connects customers to their bank accounts locally so they can pay sellers worldwide in seconds.

Open Banking payments are not only speedier, simpler and safer for consumers. They also help e-commerce merchants, iGaming operators etc. boost conversion, customer satisfaction and cost savings.

4. What is Account-to-Account (A2A) in banking?

Account-to-Account (A2A) in banking refers to payments made direct between bank accounts.

Traditional bank transfers are typically manual, slow and domestic. By contrast, Open Banking is a way of securely connecting customers to their bank accounts during checkout, so it’s slicker, quicker and works cross-border.

Customers don’t need to type in card details, expiry dates etc. Or manually make a bank transfer, reducing the potential for fat-finger errors on tiny mobile keyboards as well as data theft.

At checkout, customers simply choose their bank logo and log to their online banking. They check the information – business name, amount and so on – which appears automatically, and authorize the payment.

Open Banking-style A2A payments look and feel the same as the bank transfers customers are familiar with. But for businesses, it’s potentially transformational.

The one-to-many interface enables them to accept bank payments from customers internationally via a single connection. For those with cross-border expansion plans, it’s a big leap forward in terms of payment coverage, cost, security and more.

5. What are some examples of Account-to-Account (A2A) payment companies?

Some examples of account-to-account (A2A) payment companies include domestic interbank schemes, such as iDEAL in the Netherlands, Swish in Sweden and Zelle in the United States. Similar services may be offered by payment initiation service providers (PISPs) under Open Banking rules.

Inpay is one such example. Our Money In solution offer instant cardless pay-ins, powered by Open Banking. It’s the real-time way to accept funds from local bank accounts worldwide, without expensive card acquiring, interchange or chargeback costs.

6. What is the difference between A2A and P2P?

The main difference between Account-to-Account (A2A) and peer-to-peer or person-to-person (P2P) is in the name.

A2A is money movement between bank accounts. Whereas P2P may include bank as well as card, digital wallet, mobile money and even PayPal accounts. However, the distinction between A2A and P2P is narrowing for three main reasons.

Firstly, the funding source behind a debit card or PayPal account may indeed be a bank account, as noted above.

Secondly, it’s becoming easier to link a bank account to a mobile phone or e-mail address to pay from a bank account.

And finally, as a result of reasons one and two, the use cases for A2A payments are growing. They include B2B, B2C and C2B use cases, but also traditional P2P ones, such as paying the babysitter or splitting a bill between friends in a restaurant.

7. What is the Open Banking Account-to-Account (A2A) payment model?

Under Open Banking rules Europe and the UK, there are three main parties involved in Account-to-Account (A2A) payments.

Firstly, banks, building societies and payment companies. They provide and maintain accounts for consumer and business customers. They’re known in the Open Banking world as ‘account servicing payment service providers’ (ASPSPs).

Secondly, there are the third-party providers that enable their customers to make better use of their financial data. Either by providing account information services, or initiating payments, or both. They’re known as account information service providers (AISPs) or payment initiation service providers (PISPs).

Lastly, there are technical service providers. They work with the two previous groups to deliver Open Banking products and services.

Inpay is an Open Banking third-party provider. We’re active in payment initiation, by allowing businesses to collect funds from customers’ bank accounts via a single connection.

8. How do Account-to-Account (A2A) payments via Open Banking work?

The UX for Open Banking payments is slicker and quicker than for traditional bank transfers. Customers don’t need to top up wallets or type in card details on the tiny keyboard of a mobile device.

It’s also easier than logging in to online banking and manually completing the payment process step-by-step. When integrated at checkout, customers simply:

1. Select bank transfer
2. Choose their bank
3. Click ‘pay’ to confirm

1-2-3. That’s it.

9. What are the benefits of Account-to-Account (A2A) payments?

Account-to-Account (A2A) payments via Open Banking help all types of businesses increase revenue, cut costs and improve their business.

Increase revenue

• Attract new customers – with 20% of consumers abandoning their purchase if their preferred payment method is not offered, better bank payments help turn browsers into buyers.
• Improve ATV – a great UX and a choice of payment methods customers know and trust help drive spend, loyalty and, ultimately, revenue.
• Boost acceptance rates – 99% transaction success rates are higher than cards (91.6%) in many markets.

Cut costs

• Reduce cost of payment acceptance – no card scheme or interchange fees mean an additional low-cost payment option for your customers.
• Eliminate chargebacks and associated costs – A2A ‘push’-style payments have no in-built chargeback rights, saving time, cost and admin hassle for everyone.
• Decrease false declines – secure user authentication through banking apps helps lower false positives and the cost of declined payments for your customers.

Improve business

• Expand cross-border easily – power your global ambitions by offering the convenience and choice of local bank payment.
• Improve cashflow – real-time funds transfer is faster than cards, with all the benefits that brings for cashflow and working capital efficiency.
• Optimize fraud prevention – with no need to store, process or transmit card details, the opportunities for fraud are minimized.

10. What is happening with Account-to-Account (A2A) payments around the world?

The revised payment services directive (PSD2) regulation is driving Open Banking in Europe and the UK. Yet the themes in the regulation are global.

New players, using new technology, create more competition and in turn drive more innovation. Empowering customers to get more out of their own financial data is another key theme.

Some countries are taking a regulatory-driven approach to A2A via Open Banking, such as the EU, UK, Australia and Hong Kong. While others are taking a more market- or industry-driven approach, such as Japan, Singapore and the US.