Account-to-Account Payments Explained: The Challenge to Card Networks

What account-to-account payments actually are

An account-to-account (A2A) payment moves money directly from one bank account to another, with no card network acting as intermediary. That single sentence conceals an enormous amount of infrastructure that most consumers never see, and that merchants, increasingly, resent paying for.

A card checkout commonly involves an acquirer, card scheme, issuer and processing services. In the UK and EU, in-scope consumer interchange is capped at 0.2% for debit and 0.3% for credit, but a merchant's total acceptance price includes other contracted fees. An A2A checkout removes the card scheme but can still involve a payment-initiation provider, processors and the underlying bank-to-bank rail. Its commercial advantage must be measured using the merchant's actual contracts, fraud and operating costs rather than a universal percentage.

Push and pull: two fundamentally different flows

Not all A2A payments work the same way. The most important distinction is between push and pull.

A push payment is payer-initiated. The account holder instructs their bank to send funds to a specified destination. Classic bank transfers work this way. So does the UK's Faster Payments Service (FPS), where the payer authenticates and the money leaves their account immediately. Push payments are one-time, irrevocable once settled, and fully authorised by the person sending the money.

A pull payment is payee-initiated: the merchant or service provider collects money from the payer's account, with the payer's prior authorisation. UK Direct Debits are pull payments: the utility company, the gym, the insurance provider all draw from your account on a schedule, and the mandate can already support variable bills such as energy usage. Its trade-offs are batch timing, limited real-time controls and a consumer-protection model built around the Direct Debit Guarantee.

Variable Recurring Payments (VRP) offer a different control model. A VRP consent can let the payer pre-authorise variable payments within parameters such as a ceiling, frequency and date range. Sweeping between a customer's own accounts is established; wider commercial VRP between customers and third-party billers is still developing through an industry-led framework rather than being universally available.

The rails underneath

The speed and reach of A2A payments depend entirely on which payment rail the transaction travels over. These vary significantly by market.

In the UK, Faster Payments (operated by Pay.UK) has supported domestic near-real-time payments since 2008 and runs continuously. The scheme limit is £1 million, but individual participating institutions can set lower customer limits^[1]. Scheme and participant costs are contractual and should not be reduced to a universal "pence per transaction" claim.

Across the EU, SEPA Instant Credit Transfer provides an instant euro rail. Regulation (EU) 2024/886^[2] requires covered PSPs that offer regular euro credit transfers to offer receiving and sending instant transfers on staged deadlines. Euro-area deadlines began in January and October 2025, with later dates for non-euro-area member states and defined exceptions.

The United States has two competing instant payment rails: The Clearing House's RTP (Real-Time Payments), launched in 2017, and the Federal Reserve's FedNow, launched in July 2023. US adoption is fragmented across thousands of institutions. Neither rail approaches the market penetration that Faster Payments has in the UK, and the absence of a dominant consumer-facing product built on either rail has limited their commercial impact to date.

Why open banking is the missing consumer layer

Fast payment rails have existed for some years. The gap was never the rails: it was making A2A accessible as a checkout payment method for ordinary consumers who are not going to manually key in a sort code and account number at the point of purchase.

Open banking is what closes that gap. Under open banking frameworks (PSD2 in the EU and UK, with the UK maintaining equivalent rules post-Brexit), third-party payment initiation service providers (PISPs) can, with the consumer's explicit consent, instruct the consumer's bank to make a push payment on their behalf.

The checkout flow in practice: the consumer selects "Pay by Bank" at checkout; they are redirected to their bank's authentication screen or deep-linked into their bank's mobile app; they approve the payment; the PISP receives confirmation and the funds leave the consumer's account in real time. No card details entered. No card number stored with the merchant. No card network involved.

The user experience has improved substantially. Early open banking payment flows required clunky web redirects and suffered from poor bank-side implementations that frustrated users. Native app-to-app redirects, biometric authentication on mobile, and improved bank APIs have made the flow competitive with card wallet experiences at checkout, though it is still not universally smooth across all institutions.

The economics for merchants

The commercial case requires the merchant's own data. Card and A2A prices vary by provider, volume, payment type and contract, while fraud, refunds, reconciliation and conversion also affect total cost.

For illustration only, £1 billion of turnover at an assumed 1.5% acceptance cost would mean £15 million of fees. If half migrated to a channel assumed to cost 0.3%, the gross arithmetic saving would be £6 million. That is a scenario, not a market benchmark, and it excludes integration, incentives, fraud, failures, refunds and any change in checkout conversion.

The use cases where A2A is gaining fastest traction reflect where the savings are most material and where the consumer experience friction matters least: utility bill payment, online gaming (where consumers are motivated to complete deposits quickly), regulated financial services, and high-average-order-value e-commerce where the consumer is already in a deliberate authentication mindset. In these segments, the merchant's willingness to offer an incentive (a discount, a loyalty benefit) for choosing A2A over card can accelerate adoption in a way that would be difficult at the sub-£10 impulse purchase tier.

The B2B embedded finance opportunity is arguably even larger. Business-to-business payments frequently involve high values, established counterparty relationships, and tolerance for a brief authentication step, all conditions that suit A2A well. Replacing card-on-file arrangements in B2B procurement with VRP mandates, where the buyer pre-authorises the supplier to collect within agreed parameters, could displace substantial card volume.

Variable Recurring Payments: the unfinished chapter

VRP's potential is significant enough to deserve its own treatment. It could compete with Direct Debit and card-on-file for recurring billing by giving customers more granular, real-time control over variable collections.

The technology is not the bottleneck. VRP for sweeping, moving money between a consumer's own accounts, launched commercially in the UK in 2022, and the major banks built compliant implementations. The problem is commercial VRP: payments between a consumer and a third-party merchant.

Progress has been slower than the industry's early roadmaps suggested. The FCA, Payment Systems Regulator and industry participants have continued work on an industry-led commercial framework, including pricing, liability and consumer protection. Direct Debit's Guarantee sets a high benchmark that a VRP alternative must meet. Until that framework achieves broad bank and merchant participation, most recurring billing in the UK will continue to run over Direct Debit or card-on-file.

The APP fraud problem

A2A push payments carry a fraud risk that card payments do not: Authorised Push Payment (APP) fraud. The mechanics are straightforward and the losses are substantial.

In an APP fraud scenario, the payer is manipulated (typically via a phone call, text message, or spoofed email) into believing they are sending money to a legitimate destination: their own savings account, a solicitor handling a property purchase, a utility requiring an overdue payment. They authenticate the transaction themselves. The funds reach the fraudster's account. Because the payment was authorised by the account holder, the traditional position was that the bank bore no liability and the consumer had little recourse. That is a sharp contrast to card fraud, where the card network's chargeback rules provide a straightforward path to recovery.

The Payment Systems Regulator's mandatory reimbursement requirements took effect on 7 October 2024 for eligible APP scam payments over Faster Payments and CHAPS. The PSR's consumer guidance^[3] explains the £85,000 claim limit, eligible consumers and exclusions; a possible excess and time limits can apply. Sending and receiving providers normally share the reimbursement cost. It is not a blanket guarantee for every transfer, dispute or customer.

For payment providers building A2A products, the reimbursement obligation changes the cost model materially. Fraud controls (confirmation of payee, real-time transaction monitoring, behavioural analytics) are no longer just risk management niceties. They are directly tied to the firm's loss exposure. This has driven investment in fraud prevention infrastructure among the major open banking payment providers, but it also narrows the margin advantage for smaller entrants who cannot spread the fraud risk across a large portfolio.

How the card networks are responding

Visa and Mastercard are not passive observers of the A2A trend. Their response has been to acquire their way into the open banking infrastructure layer.

Visa announced the acquisition of Tink, the Swedish open banking platform, in 2021 and completed the deal in 2022 for approximately €1.8 billion. Mastercard announced its acquisition of Aiia, a Danish open banking provider, in 2021, alongside a broader set of open banking assets accumulated over the preceding years. Both networks are now positioned to offer A2A payment services through their own infrastructure: even as A2A displaces card-scheme intermediation, the card networks capture some of the value through platform ownership.

Mastercard also offers Pay by Bank and open-banking services across several markets. The underlying products and protections vary by market, so they should not be treated as a single card-like dispute framework; the strategic point is that the network is building fee-generating services around A2A even where interchange is absent.

Whether this is a successful hedge or a strategic concession to A2A's momentum is a question the market has not yet answered. Interchange is paid by acquirers to issuers, not to the networks: Mastercard sets the rates but does not receive interchange^[4], and its own revenue comes from service, transaction-processing and value-added fees. Interchange still shapes network economics indirectly, because it drives issuer participation and therefore volume, and A2A does not generate equivalent per-transaction issuer revenue even where the networks own the pipes. But owning the infrastructure that processes A2A, and charging for that, is better than ceding the space entirely.

The merchant checkout reality

Despite favourable economics and improving user experience, A2A at checkout has not displaced cards for mainstream UK or EU e-commerce. Understanding why is as instructive as understanding the opportunity.

Consumer habit is powerful. Stored card credentials on Apple Pay, Google Pay, and browser autofill make card checkout frictionless for the majority of online purchases. The cognitive overhead of switching to a "Pay by Bank" option (even a smooth one) requires a reason, and saving the merchant money is not, in itself, the consumer's reason.

The absence of universal VRP means A2A cannot easily replace recurring card-on-file arrangements. Many subscription businesses use a stored card as the default collection mechanism precisely because the consumer authorised it once and has largely forgotten about it. Recreating that dynamic with VRP requires consumer action at the point of switching.

And there is the goods-dispute question. Card schemes provide chargeback processes, and qualifying UK credit-card purchases may have statutory Section 75 protection. A one-off A2A push payment does not automatically provide an equivalent network dispute process. The PSR reimbursement framework covers eligible APP scams, not ordinary complaints that goods were defective or never arrived. The precise protection therefore depends on the payment product and contract.

The sectors where A2A is genuinely gaining are those where the consumer's motivation aligns with the merchant's economics: high-value purchases, utility and bill payment, regulated financial product purchases, and contexts where the merchant can credibly offer an incentive for the A2A choice. The broader displacement of cards at general retail checkout remains, for now, a medium-term prospect rather than an immediate reality.

Sources and methodology: Scheme limits were checked against Pay.UK, APP reimbursement against the PSR's consumer guidance, and EU deadlines against Regulation (EU) 2024/886. The checkout model is consistent with Open Banking Limited's Pay by Bank explanation^[5]. Pricing examples are explicitly hypothetical because commercial rates are not universal. Corporate acquisitions are based on the companies' public announcements.