What Are A2A Payments (Account-to-Account) in Banking?

Paying straight from one bank account to another is known as Account-to-Account (A2A) payments. There are no middlemen or payment devices like credit cards involved in this type of transaction.

Instant payment networks such as India’s Unified Payments Interface (UPI) and Immediate Payment Service (IMPS) allow funds to be moved instantly between accounts, offering real-time settlement with no intermediaries. A2A payments are low-cost, push-only credit transactions that finish in seconds for both consumers and companies.

A2A payments allow corporations to transfer money directly from their bank accounts to the bank accounts of their receivers, eliminating the need to print, mail, receive, deposit, and wait for the cash to settle with the recipient’s bank account. This can help vendors that want to get paid quickly and secure their cash flow. In India, A2A payments are processed through UPI, IMPS, and NEFT, which enable real-time or near-real-time settlement without relying on traditional card networks — each system offering unique characteristics; for instance, here’s a closer look at the difference between IMPS and UPI.

While wire transfers are used for international remittances, most domestic business transactions in India have shifted to low-cost digital rails like UPI and IMPS, making traditional wires largely obsolete for internal use. Additionally, they can be effective in situations where big internal payments must be delivered within 24 hours, such as real estate enterprises or bulk shipping deals that need to satisfy payment deadlines.

Types of A2A Payments

There are two types of A2A payments.

1. Push payments: Buyers must manually transmit money to you to use this form of payment for sending one-off amounts. Some fintech companies use an ‘Instant Bank Pay’ as an example of this type of transaction. Sending customers messages or prompts via APIs can also prompt this type of push payment.
2. Pull Payments: Here, customers’ money is withdrawn, or “pulled,” from their accounts by businesses. Customers must give their approval before businesses use this type of payment method, which is commonly utilized by organizations with recurring payment structures such as subscriptions and membership billings. A direct debit mandate is one example of this.

The discussion on A2A payments has increased because it’s possible that A2A payments could replace card payments as the chosen mode of payment for both customers and companies in the future, thanks to a shift in consumer behavior following the COVID-19 pandemic and developments in novel and current payment rails. Card networks like Visa and Mastercard are losing market share in India as UPI becomes the default method for everyday digital payments.

Benefits of A2A Payments for Consumers and Businesses

The different benefits of A2A payments make it a preferred development in payment trends. Businesses and Individuals alike can benefit in the following ways:

Excellent Customer Service

By merging A2A payments with open banking technologies, enterprises can now provide a frictionless payment experience to their clients. There are no middlemen and no need to enter credit card information numerous times for every payment. Rather than that, APIs have permitted the development of a financial structure capable of accepting both one-time payments and recurring payments via mobile or desktop browsers and applications.

Compliance with Multi-Factor Authentication

While Strong Customer Authentication (SCA) is a regulatory requirement in the European Union, India enforces robust multi-factor authentication under guidelines from the Reserve Bank of India (RBI). UPI transactions, in particular, require secure elements such as:

• Knowledge: the user’s UPI PIN
• Possession: access to a registered mobile device linked to the bank account
• Inherence: biometric authentication via fingerprint or facial recognition (on supported devices)

When A2A payments are executed through UPI, these authentication layers are seamlessly integrated, ensuring high security without disrupting the user experience. As a result, businesses using A2A methods in India benefit from built-in compliance and reduced fraud risk — without compromising speed or convenience at checkout.

Consistently Meet the Evolving Needs of Consumers

Consumer habits and preferences change over time, and the pandemic of COVID-19 has expedited the shift away from traditional banking and mode of payment. Rather than that, buyers are looking for simpler and time-saving options, with the OBIE reporting that more than half of Britons now frequently use Open Banking-powered applications. Additional research from Fintech apps like GoCardless indicated that bank debit is the preferred way of payment for subscriptions in the United Kingdom, Germany, and France.

Shoppers are demonstrating that, while they desire faster payment methods, they still value ease, reliability, and safety. Card payments have yet to show the same level of innovation or convenience as A2A solutions like UPI. As a result, they are increasingly viewed as less convenient — especially among younger consumers who prioritize instant, low-cost options. A recent study by Bank of America found that Gen Z, who are expected to hold over a quarter of global accounts by 2031, tend to avoid payment methods that could lead to debt, such as credit cards — a promising sign for the growth of A2A payments.

How the Pandemic Accelerated A2A Payments Adoption

The global pandemic’s devastating economic effects from its wake in the last quarter of 2019 opened people’s eyes to the special challenges of traditional payment methods. Even businesses realized they could ditch paper-based processes in favor of digital payments. Consumers stopped seeing the need for card maintenance fees and intermediaries in their financial transactions.

As a result of the pandemic, the number of contactless payments in the UK climbed by 12 percent to 9.6 billion in 2020. It was also observed that more people shifted from using physical cash for payments

Over a quarter of all transactions in the United Kingdom were made through contactless payment, according to the most recent data from UK Finance. Since 2012, the percentage of payments made via tap-and-go has increased from 7% to 27%.

In 2020, the amount of UK cash payments decreased by 35%, resulting in only 17% of all UK payments being done with paper money. “The pandemic ultimately results in some remarkable changes in payments behavior, and while it’s too early to say whether they are permanent changes, we did see an acceleration in some existing trends such as the reduction in cash usage and the growth in contactless and mobile payments,” says David Postings, chief executive of UK Finance.

In India, over 80% of internet users now engage in digital financial activities, with UPI apps like PhonePe, Google Pay, and Paytm facilitating mobile-first banking and payments, even in rural regions. The pandemic led to the growth of A2A payments, and now online payments account for 54% of all business-to-business payments. In 2024, UPI recorded a 59% year-on-year increase in transaction volume, processing over 14 billion payments per month — growth that underscores the importance of selecting the right payment gateway for UPI for businesses operating in India’s real-time A2A ecosystem.

Globally, many merchants have challenged high card processing fees, leading to the rise of alternative payment rails like A2A. In India, this shift is especially evident with UPI, which enables merchants to accept payments instantly at minimal cost — with no dependence on card schemes.

The world’s major credit card companies will be keeping a close eye on this dispute. American Express, Visa, CapitalOne, Chase, and Mastercard both have impressive margins EBITDA of 60-70%, which could suggest a market decline, as numerous observers have noted.  When all banks are linked to all retailers and consumers at all times, these 4-party party intermediaries of the 1960s may become history. A2A payments exemplify this shift, acting as modern disruptors to traditional four-party card networks.

In India, the pandemic significantly accelerated the adoption of digital payment methods, with small businesses and street vendors increasingly accepting UPI via QR codes as the default payment mode. For example, the FCMG and grocery sector (where 3 in 4 dealers asserted their need to enhance their capabilities for online payment tools usage) has seen such significant growth online. It is clearly incredibly motivated to reduce its costs of processing payments on such frequent transactions.

The Future of A2A Payments and Open Banking Innovation

Because of open banking emergence and real-time transactions, the A2A payment option has the potential to become a real credible challenger to the credit card payment rail for daily transactions as well. This is nothing new; bank transfer services have been around for a while and are conventionally used by customers to schedule constant bill payments (i.e., direct deposit).

According to Worldpay’s 2024 Global Payments Report, India leads globally in A2A transactions, with UPI accounting for over 50% of all e-commerce payments in the country — far surpassing card usage. This shift reflects a broader global trend, as nine out of ten Gen Zers live in emerging market economies where mobile-first, low-cost solutions like UPI and PIX (in Brazil) are rapidly gaining ground. For governments in these regions, investing in open banking infrastructure and seamless A2A systems is becoming crucial to empowering this generation's financial behavior and expanding their purchasing power.

While legacy infrastructure still exists, India’s payment ecosystem is rapidly moving away from card-centric rails. Despite widespread adoption of cloud-based technology by banks, traditional card networks are being replaced by real-time, API-driven alternatives like UPI, which has become the default method for digital transactions across both urban and rural segments.

The spec of A2A payments is that it allows third parties to initiate payments on behalf of consumers and make direct payments from the customer’s bank account to reduce fees for both the banks, merchants, and the customers, all of whom benefit from the advent of open banking. In light of Mastercard’s announcement that it will raise interchange fees for UK consumers buying from Europe starting from the last quarter of 2021 and rumors that Visa and Mastercard will reintroduce increased traders’ fees which were delayed by the Covid-19 pandemic, A2A has indeed a unique opportunity to take advantage of this and capitalize.

Clearly, A2A payments are still in their infancy, but the Omdia ICT Enterprise Survey (ICTEI) 2020/21 found that payment issuers/acquirers see it as the most promising novel opportunity for open banking.  This is the report from their interview of more than 6,600 CIOs and other high-ranking IT decision-makers between July and September 2020. According to Worldpay’s 2024 Global Payments Report, A2A payments — including UPI in India and similar systems worldwide — already account for over 13% of global digital commerce, and are expected to grow significantly, especially in emerging markets.

Final Thoughts

The FinTech industry is strategizing towards a “cardless” future. Due to the business interest in sustaining card revenue, card issuers and networks are understandably unwilling to urge customers to switch to alternative payment methods. Legacy technology, on the other hand, is not going to match future customer wants and aspirations. Because of the adoption of open banking by banks, businesses, and eventually customers, change is unavoidable.

By diversifying their product range with targeted acquisitions and product launches, legacy card networks are signaling to the rest of the market that A2A payments pose a major threat to their existing payment rail business.

As a result, Mastercard bought Vocalink, a UK-based payments system startup, in 2017 and Nets’ A2A payment business in 2019, which was finalized following regulatory approval. In India, Paytm, PhonePe, and BharatPe have enabled real-time bank-to-bank payments via UPI since 2016, making them central players in the country’s A2A ecosystem. These platforms leverage India’s open API-based infrastructure to process billions of transactions monthly — without relying on traditional card networks. All these developments underscore the global shift toward A2A payments.