With the adoption of instant payment methods taking the world by storm over the past few years, A2A (account-to-account) payments have flourished. In fact, according to new research from Juniper Research, the fintech and payments markets researcher, the payment method could rise from 60 billion transactions in 2024 to 186 billion by 2029.
The 209 per cent increase was recorded in Juniper Research’s How Open Banking Is Driving A2A Payments report. Users can make instant settlements and merchants aren’t faced with high transaction fees (often associated with card payments) as A2A payments do not require intermediaries. One key factor enabling this growth is open finance.
One notable way in which this has happened is through variable recurring payments (VRPs). An A2A-specific solution where customers connect authorised payment providers to their bank account, VRPs facilitate agreed recurring payments on the customer’s behalf, within set limits. Consequently, businesses have grown interested in VRPs due to their increased flexibility and transparency compared to direct debit.
Research author Matthew Purnell remarked: “VRPs provide a service not easily replicable beyond A2A, boosting A2A’s potential. 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.”
Competing with cards
The research found instant payment roll-outs are creating A2A-based opportunities, even in card-dominated markets like the US. For instance, FedNow, the US’s newest payment rail launched in 2023, has an average transaction fee of four cents; making this solution advantageous when compared to cards, with an average fee of 3.5 per cent per transaction. Therefore, as adoption and use cases develop, cost-efficient A2A payments will likely disrupt the card-dominated US market.
Contingent on open banking’s adoption
While open banking could have a big impact on the development of A2A payments, the tech will only truly make a difference if it sees greater adoption. According to Juniper Research, open banking has seen considerably less uptake than other new fintech trends. A lack of knowledge surrounding consumer privacy and protection has led to many users questioning the service.
Some markets represent outliers, such as the UK, which reached over 11 million users in 2023, with 10.5 million transactions recorded in July 2023. To accelerate the tech in the UK, the JROC (Joint Regulatory Oversight Committee), which was established in 2023. It has committed to:
Facilitate availability and performance
Mitigate risks of financial crime
Ensure effective consumer protections
Improve information flows to third parties and end users
Promote additional services and encourage innovative use cases
Once all this takes place, open-banking-based A2A solutions will become much more appealing to fintechs and other financial institutions.
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