Account-to-Account Payments: What is the Actual Definition?

In its simplest form, the term "Account to Account" or "A2A" describes a payment that moves money directly from one bank account to another. This process bypasses traditional card networks, such as Visa and Mastercard, which have historically served as intermediaries for most digital transactions.

While the definition may seem straightforward, the underlying mechanics, technologies, and implications are more complex. A2A is not a single product but a category of payments built on different infrastructures, or "rails." Understanding these rails and the ecosystem built around them is essential for any professional in the payments industry.

This article provides a technical examination of A2A payments, delving beyond surface-level definitions to explore how they operate, why they are gaining prominence, and what their adoption means for the market.

What is the core technology behind A2A payments?

A2A payments rely on bank-owned infrastructures to transfer funds. The specific technology used depends on the region and the required transaction speed. For decades, these transfers were primarily handled by batch-processing systems.

Automated Clearing House (ACH): In the United States, the ACH network has long been the primary rail for bank transfers. It processes large volumes of transactions in batches, meaning payments are collected and processed at specific times of the day. This method is reliable and inexpensive for recurring payments, such as payroll and direct debits, but it is not instantaneous. Settlement can take one to three business days, making it unsuitable for many modern commerce scenarios.

Real-Time Payments (RTP): The significant shift in A2A is the global adoption of real-time payment networks. These systems operate 24/7/365 and process transactions individually in near real time. Examples include SEPA Instant Credit Transfer (SCT Inst) in Europe, FedNow and The Clearing House's RTP network in the US, and Pix in Brazil. These networks do more than just move money quickly. They support the ISO 20022 messaging standard, which enables the transmission of rich data along with the payment. This data facilitates easier reconciliation for businesses.

The final crucial component is Open Banking. Mandated by regulations like the Second Payment Services Directive (PSD2) in Europe, Open Banking requires banks to provide third-party providers with secure access to customer accounts via Application Programming Interfaces (APIs). These APIs serve as the link that enables a fintech provider to initiate an A2A payment on behalf of a customer, with the customer's explicit consent.

How does an A2A transaction work in practice?

To understand the practical difference, consider a typical e-commerce checkout. When you pay with a credit card, the process involves multiple parties: your bank (the issuer), the merchant's bank (the acquirer), the card network, and a payment gateway. The transaction requires authorisation, clearing, and finally, settlement over several days.

An A2A payment flow initiated through Open Banking is much more direct.

1. At checkout, you select the "Pay by Bank" option.
2. You are prompted to select your bank from a list.
3. The system securely redirects you to your bank's mobile app or online banking portal. This handover is critical for security and trust.
4. You authenticate yourself using your bank's established security method, such as your fingerprint, face ID, or a password.
5. The payment details, including the merchant's name and the exact amount, are pre-populated for you to review. You do not need to enter any account or card information manually.
6. You confirm the payment with a single tap.
7. Behind the scenes, your bank initiates a credit transfer over an instant payment rail, such as SCT Inst.
8. The funds are sent from your account and credited to the merchant's account within seconds. The merchant receives immediate confirmation of payment and can release the goods or services.

This process removes the card networks entirely. The payment is a direct push from your account to the merchant's, orchestrated by a licensed Payment Initiation Service Provider (PISP).

Why is A2A gaining momentum now?

The rise of A2A payments is not accidental. It is the result of a convergence of regulatory, technological, and commercial factors that have created a fertile ground for innovation.

First, regulation has been a primary catalyst. PSD2 in Europe effectively created the legal framework and technical standards for a competitive market in payment initiation. By forcing banks to build and maintain secure APIs, regulators laid the groundwork for new payment solutions to emerge. Other regions are following with similar Open Banking or Open Finance initiatives.

Second, the widespread availability of real-time payment infrastructure is essential. Without the ability to settle funds instantly, A2A would offer a slight advantage over cards for time-sensitive transactions. As more countries upgrade their national payment systems to be instant, the business case for A2A becomes considerably stronger.

Third, the cost structure is a powerful motivator for merchants. Card payments incur various fees, most notably interchange fees, which are paid to the card-issuing bank and typically range from 1.5% to 3.5% of the transaction value.

Because A2A payments bypass the card networks, they avoid these percentage-based fees. Instead, they often involve a significantly lower flat fee per transaction, presenting a substantial cost-saving opportunity for businesses, especially those with high transaction volumes or low margins.

What does Wero represent in the A2A landscape?

Wero, developed by the European Payments Initiative (EPI), is a concrete example of how the market is organising around A2A principles. Backed by a consortium of central European banks, Wero is not just a technology but a comprehensive payment scheme. Its objective is to create a unified, pan-European payment solution built directly on the SCT Inst rail.

Wero aims to provide a consistent user experience for A2A payments across Europe, regardless of which bank the customer or merchant uses. It will function as a digital wallet, combining person-to-person (P2P) transfers, online shopping, and in-store payments.

In effect, Wero is Europe's strategic effort to create a domestic payment standard that can compete with the established dominance of non-European card schemes. It demonstrates the evolution of A2A from a simple bank transfer capability into a branded, feature-rich consumer payment product.

What are the challenges and considerations for A2A adoption?

Despite its advantages, A2A payments face hurdles. Consumer habits are deeply entrenched. For decades, consumers have been conditioned to reach for a card, associating it with benefits such as rewards points and robust fraud protection.

The most significant functional gap is the absence of a chargeback mechanism equivalent to those provided by card networks. Card chargebacks offer a straightforward way for consumers to dispute transactions and recover funds in cases of fraud, non-delivery, or defective goods.

A2A payments are credit transfers or "push" payments, which are final and challenging to reverse. While payment schemes are developing dispute resolution processes and solutions, such as Request to Pay (RtP), which offer more control, the consumer protection framework is not yet standardised or well-understood, as it is for cards.

Furthermore, the A2A market remains fragmented. While Wero aims for unification in Europe, merchants operating globally may need to integrate with numerous different A2A providers and banking APIs to achieve comprehensive market coverage. This fragmentation introduces technical and operational complexity, acting as a barrier to adoption for some businesses.

Is this the beginning of a new payments era? 

The shift toward Account-to-Account payments marks a structural change in the digital economy, moving value from proprietary card rails to shared banking infrastructure. This transition introduces new technical challenges and strategic questions for financial institutions and businesses. Success requires deep expertise in payment systems, ranging from legacy clearinghouses to modern real-time networks and complex API integrations.

Building or connecting to these systems demands a partner with a proven record in software development for the financial sector. Ximedes specialises in creating robust, secure, and compliant payment solutions, helping financial institutions adapt to and lead in the evolving payments environment.