Account to account (A2A) payments – sometimes referred to as Open Banking payments – are payments from one party to another via bank transfer. Many of these can now be done in seconds and they are an increasing threat to the long-established card ‘scheme’ payments which have dominated non-cash payments for decades. So what will this mean for users of payment services and for the payments industry in general? And what should they be doing about it?
It is already clear that A2A payments will disrupt or even replace traditional card scheme payments.
The bigger question is how much disruption there will be and who should be worried. And, of course, what opportunities will there be and for who.
Technology advances and evolving regulatory enhancements have contributed to making A2A payments much more accessible, effective and affordable. PSD2 (the second European payments directive) which provided the legal framework for payment initiation services (PIS), SEPA regulations and improving payments processing systems have led to instant payments becoming almost universally available, at least in Europe.
Along with the expanding e-commerce world and with the rapid development of sophisticated applications for use in the business to consumer (B2C) space, these combine to make instant account to account payments a very attractive alternative to card payments in many interactions, particularly B2C.
Background
Card schemes were originally introduced back in the 1950s in the USA to allow consumers to make purchases for which they did not necessarily have the funds readily available. It started with the Diners Club Card, a charge card that allowed people to dine out at various restaurants and pay off one bill at the end of the month. This was rapidly followed by other change cards and then credit cards, which also offered a revolving credit facility. Debit cards were pioneered in the 1970s, further developed in the 1980s and achieved widespread adoption by the 1990s. Prepaid cards also emerged in this period.
Meanwhile, bank to bank transfers still generally took two or three days (and sometimes more) to clear. Payments by cheque not only took just as long but could ultimately be reversed if the cheque was ultimately not paid. Same day money transfers were still very expensive and instant account to account payments were not an option for bank customers.
So, when the internet exploded in popularity in the 1990s and businesses quickly realised its potential, it was clearly vital to find an effective means of payment for online transactions. Scheme cards were already being used for ‘remote’ transactions such as ordering flowers by telephone or ordering catalogue items by mail. Although vulnerable to security and fraud risks (which have been gradually addressed over the decades since) card payments were viewed as the only practical way to get to market quickly. The slowness of bank transfers, combined with the impracticality of having to get bank details and establish a new payee for each purchase, meant this option was not a realistic option for the general consumer market. So card payments became the default payment method in the early days of the internet.
The Current Situation
Significant advances in technology, regulation, standardisation, consumer behaviour and competition have since led to A2A payments becoming a realistic option in many scenarios, both B2C and B2B.
Both types of payments, cards and A2A, have their advantages and disadvantages. There are certain scenarios where each type of payment is clearly more suitable for the circumstances or the size of the payment to be made. But for everyday payments, whether made in a store at point of sale using a tap of the phone or, when making an online purchase by clicking on a preferred payment method or using an electronic wallet, so long as the experience is seamless, secure and not cost-prohibitive for the payer, most do not care whether the money goes from their account to the beneficiary via a card scheme or directly from their account.
For the consumer, increasing choice, enhancing security and a reduction in cost are all obviously welcome. For receivers of these payments, generally merchants, A2A payments will typically mean a reduction in the cost of accepting payments, without any significant compromise to speed or security, and so will be a very attractive option in a lot of cases.
Advantages of A2A include:
Disadvantages include:
What are the Implications?
A significant migration from card to A2A payments would mean considerable disruption to the existing payment ecosystem where considerable revenues are currently made. This will impact not just by the card schemes themselves, but also the acquirers (who process the transactions for merchants) and the issuers of cards, mostly banks, as well as other payments services providers, who get a slice of what the recipient pays for each payment.
Migration from card payments to A2A payments already is, and will continue to be, driven primarily by merchants seeking lower cost solutions. For instance, the cost of an A2A payment for a merchant is typically up to 0.5% and generally at the lower end of that range, while card transactions typically range from 0.5% up to over 3% in some cases.
Consumers, on the other hand, are much less likely to change their behaviour as they stick to what they know and continue to enjoy the protections, security and convenience that the traditional card schemes offer. However, merchants may well try and incentivise them to do otherwise.
Evidence suggests that the shift has already commenced and that momentum might be building. For instance, the Capgemini Report 2025 predicts that instant A2A payments will grow from 16% to 22% of all non-cash payments between 2023 and 2028 with card-based transactions declining from 57% to 50% in that time. Juniper research indicates that global A2A payments are projected to rise to 186 billion transactions by 2029, up from 60 billion in 2024. Various estimates suggest that annual volume is increasing to about €25 trillion, meaning that even a 5% shift would account for more than one trillion euro per annum. These are big numbers.
Trends such as the launch and expansion of the European Payments Initiative’s Wero and, more recently, the launch of UK Payments Initiative Ltd on 2 June 2026 are clear indicators that A2A is happening.
The impact on the Payments Industry
Card issuers and card acquirers should be assessing their business models on a continuous basis. The expanding world of e-commence means that the market will continue to grow so some firms may see revenues rise further despite a decline in market share, although this may not ultimately be sustainable if the rate of migration to A2A gains greater momentum. Should these firms be looking at diversifying into A2A payments themselves? Will this competition lead to lower interchange fees by the card schemes, meaning lower fees for issuers? And for acquirers will this inevitably lead to lower merchant service charges, driving a drop in revenue? All these issues will need to be explored. In any event, both issuers and acquirers should be ensuring their strategies and subsequent business plans have given sufficient consideration to the rise in A2A payment volumes.
For merchants this can only be good news as A2A will offer a lower cost alternative, either as a form of payment itself or, indirectly, as competition puts pressure on the card schemes to lower their fees. For consumers, greater choice is always a good thing, however there is also the economic reality is that benefits must be paid for. So, if consumers want to continue to have scheme protection for purchases, chargeback rights, dispute resolution and, in some cases, ongoing access to credit, these will come at a price which is initially paid for by the merchants but ultimately passed onto consumers in the form of higher prices. Merchants should be assessing their payment options and deciding which payments are best suited to what they are selling. Consumers can enjoy the benefit of increased choice and competition but need to make sure they aware of protections that may not be afforded by using A2A payments over card payments.
Other tech and payments players will see the opportunities that A2A payments present. Some industries are already prolific proponents of A2A, including B2B, government and public sector and gaming and betting. The advantages here are obvious. Where a business is dealing with what is effectively a ‘cash’ settlement, such as collection of taxes, school fees, or topping up a gaming account, where there is no underlying product with a mark-up, a flat and/or low fee payment method is hugely valuable. Where there is trust between the parties involved, such as clubs and societies, family members, or larger value purchases such as cars (from recognised dealers) or even houses, A2A is generally preferable to cards. Where there is an opportunity for payments to help deliver products and services more conveniently and more cost effectively, you can be sure there will be someone there to exploit it.
Both A2A and card payments will also be impacted by PSD3 (the Third Payment Services Directive) which is expected to be fully implemented in 2027 and to further encourage greater competition and choice in the payments sector. Provisions will include more stringent requirements around fraud prevention, refunds, data sharing, open banking standards and strong customer authentication.
To continue the conversation, reach out to Russell Burke, Board Advisor, Yale Consulting.
