Simply put, an account-to-account payment generally means moving money directly from one bank account to another, without using the infrastructure that credit and debit cards run on.
A2A payments can be used to send money, or to request money.
Which Brands Are Commonly Associated with A2A?
- Cash App
What Are Common A2A Forms?
- Paper check
- ACH (Automated Clearing House)
- RTP (Real-time Payments)
A paper check involves a payer writing out payment details and signing the check for authorization. The Federal Reserve processes checks. Paper checks can be converted into ACH payments.
The Federal Reserve shows use of paper checks is down over 40% in the U.S. since 2015.
ACH is a network that processes payments between U.S. bank accounts. NACHA (National Automated Clearing House Association) oversees this network, but the Federal Reserve and The Clearing House operate the network itself.
Another term for ACH is eCheck. ACH moves faster than paper checks, and generally have processing fees that are lower than credit/debit card fees. For example, ACH may cost <1% of the transaction amount or come with a flat fee, such as $0.75.
‘Real-Time’ is often used in marketing to describe a fast payment. A true real-time payment is initiated and settled virtually at the same time. Funds are available to use immediately in a bank account.
A real-time payments network follows a specific standard, typically from the International Standards Organization. This type of standard is used across payments, securities, trading, cards, and forex. Most often, RTP networks have 24/7, year-round access.
Japan holds the record for the longest-running RTP network, at 49 years with its Zengin network.
Common A2A Brands
Smartphone-based apps like PayPal, Venmo, Zelle, and Cash App are popular tools for A2A payments. These often use the ACH network, though RTP is also entering this space.
Consumers widely utilize these applications known as ‘peer-to-peer’ (P2P) apps to make payments to each other. Notably, businesses are increasingly leveraging these apps to accept payments in recent times. One TSG survey of U.S. small businesses found that ~80% of businesses with under $1M in annual sales used P2P apps to accept money from customers.
A2A is extensively prevalent in various regions today. For instance, approximately 80% of Brazil’s adult population actively uses the A2A system, Pix. Additionally, India’s UPI A2A system boasts a user base of 300 million people. The iDEAL A2A system in the Netherlands reportedly serves nearly 100% of Dutch consumers.
How Do A2A Payments Compare to Card Payments?
A2A generally involves low fees and fast money movement. While development is still underway, A2A generally lacks the types of rewards and protections that credit card payments bring and they don’t have the built-in behavior habits that the current card-based networks have in many geographies. For example, TSG studies consistently show that consumers in the U.S. prefer debit cards for in-store purchases and credit cards for online purchases.
Some individuals state that A2A payments will surpass the adoption of credit/debit cards in the future. However, it is feasible that debit cards could run A2A payments and use a different system than they do currently.
As real-time payments continue to develop, more A2A payment options will likely be available online and at the physical point of sale. That said, traditional card-based payments aren’t going away anytime soon.
As the payment form factors of the future shake out, a lot of innovation has yet to be unlocked.
Related: What is a Payment Facilitator