The payment landscape has evolved at an exponential rate over the past decade, with many payment methods rising to become some of the most used solutions across retail, eCommerce, B2B (Business-to-Business), and P2P (Peer-to-Peer) scenarios. This, according to an update from Juniper Research.
Juniper Research noted that in recent years, the design of new payments infrastructure, “the emergence of Open Banking, and the flourishing of digital wallets have shifted the landscape.”
Juniper Research added that digital payments have “become a standard option for consumers, as many economies shift away from physical cash.”
As a result, new ways of making digital payments are “emerging, with digital wallets such as Apple Pay, Google Pay, Alipay and PayPal becoming accepted by a sizeable number of retailers, eCommerce platforms, and other businesses globally.”
However, Juniper Research also mentioned that “the majority of these payments still go through existing card systems (such as Visa and Mastercard), meaning that retailers still rely on card-based infrastructure.”
‘A2A payments move money directly from one bank account to another bank account, without the need for additional intermediaries or payment instruments, such as cards. A2A payments can cover many use cases, such as P2P, P2B (Person-to-Business) or G2P (Government-to-Person).’
It is worth noting that whilst A2A payments are made from bank accounts, “not all pay
by bank payments are A2A payments; pay by bank can refer to any payment initiated
through a bank account, whether to another bank account or otherwise.”
As explained by Juniper Research, this distinction is “made since many use the terms interchangeably due to their similarities, and is worth mentioning given the specification of pay by bank being an available offering from many A2A vendors, highlighting the inclusivity of bank payments not being restricted to A2A use cases.”
A2A payments can be classified into two types of payments:
- Push Payments: These payments are then said to be initiated by the account holder from their bank account to another bank account. They can be initiated through various channels, such as online banking, mobile banking apps, and so on.
- Once initiated, the payment is processed by the financial institution and sent to the recipient’s account. These payments are typically one-time payments in the form of bank transfers, and APIs can be used to initiate payments by sending customers notifications or action prompts.
- Pull Payments: Payments initiated by the recipient are pull payments, pulling the
funds directly from the payer’s bank account. For pull payments, the payer provides
the necessary information and authorises the recipient to withdraw the funds. - One of the most common use cases that is mentioned for pull payments is subscription services, where businesses can pull the required funds directly from a consumer’s bank account at agreed-upon intervals.
- And when compared to typical automatic payments, pull payments reduce the risk of payment errors, since the recipient is responsible for initiating the transaction and ensuring that the correct amount is withdrawn.
It is forecasted that the total volume of consumer A2A payments “will reach 60 billion
transactions by 2029, increasing by 209% from 18 billion in 2024.”
A2A has gained an advantage “over alternative payment methods, with instant settlements and cheaper transaction fees than cards increasing its desirability to merchants.”
This, alongside developments to instant payment rails and open banking solutions “have facilitated the value of A2A payments.”
Open Banking developments have enabled the proliferation of A2A solutions.
Notably, Variable Recurring Payments (VRPs), “an A2A-specific solution in which customers connect authorised payment providers to their bank account, facilitate agreed recurring payments on the customer’s behalf, within set limits.”
Consequently, businesses and banks have grown “interested in VRPs due to their increased flexibility and transparency compared to direct debit.”
Open Banking specific solutions such as VRPs represent “a significant opportunity for vendors, with interest in the solutions increasing.”
Instant payment roll-outs are creating A2A-based opportunities, even in traditionally card dominated markets like the US.
For example, FedNow, the US’s most recent payment rail “which launched in 2023, has an average transaction fee of 4 cents; making this solution advantageous when compared to cards, with an average fee of 3.5% per transaction.”
Juniper Research concluded that “as adoption grows and use cases multiply, cost-efficient A2A payments are likely to disrupt the card-dominated US market.”
