Account-to-Account Payments
What Are Account-to-Account Payments? Definition and How They Work
Definition
Account-to-account (A2A) payments are direct transfers of funds from one bank account to another, initiated via open banking APIs or domestic payment rails, such as Faster Payments, SEPA Instant, FedNow, or RTP, without routing the transaction through a card network. A2A payments are push payments: the payer instructs their own bank to send funds, rather than the merchant pulling funds from the payer's account.
How it works
A2A payments combine three layers: an open banking API layer, an authentication layer, and a domestic payment rail.
The open banking API layer is provided by the payer's bank, which is required by regulation (PSD2 in the EU, similar frameworks in the UK) to expose a standardised interface allowing licensed third parties, Payment Initiation Service Providers (PISPs), to submit payment instructions on behalf of account holders. The PISP is typically the merchant's payment provider or an open banking specialist embedded in the payment stack.
Authentication is handled by the payer's bank directly. When a consumer selects "Pay by Bank" at checkout, they are redirected to their banking app or web portal to authenticate, typically via biometrics or PIN, and explicitly approve the payment. This SCA step happens within the bank's own trusted environment, meaning the merchant never sees or stores bank credentials.
Once authenticated and approved, the bank executes the payment instruction over its connected domestic real-time rail. In the UK, this is Faster Payments; in the EU, SEPA Instant; in the US, FedNow, RTP, or the ACH network. Settlement can be immediate or near-immediate depending on the rail. Funds arrive in the merchant's account within seconds, and because the payment is a push (payer-initiated), there is no chargeback mechanism analogous to card disputes, though refund flows and regulatory protections exist.
Variable Recurring Payments (VRPs) extend the A2A model to recurring and subscription use cases, allowing a one-time SCA setup for a mandate that governs future payments within pre-agreed limits.
Why it matters
A2A payments directly attack the cost structure of card acceptance. A merchant paying 1.5%–2.5% MDR on card transactions may pay 0.1%–0.5% for an equivalent A2A payment, because interchange, scheme fees, and acquirer margin are removed from the chain. For high-volume merchants, this cost differential compounds significantly.
Settlement speed is a second advantage. Card transactions settle on T+1 or T+2 schedules depending on acquirer and scheme; A2A payments on Faster Payments or SEPA Instant settle in seconds. Improved cash flow and reduced working capital requirements are material for many merchant categories.
The fraud dynamic is different from cards. Because A2A payments are push payments, authenticated by the payer's own bank, there is no card-not-present fraud vector in the traditional sense. However, Authorised Push Payment (APP) fraud, where a consumer is socially engineered into approving a fraudulent payment, is a significant risk, and regulators in the UK have introduced mandatory reimbursement requirements for APP fraud victims.
Adoption varies significantly by geography. The UK and Netherlands are most advanced; the EU is accelerating under PSD3/PSR; the US is at an earlier stage given weaker open banking mandates and strong consumer preference for card rewards.
With PXP
PXP supports merchants and partners across the payments value chain. To talk through account-to-account payments as part of your payment strategy, get in touch with our team.
Frequently asked questions
What is the difference between A2A payments and card payments?
Card payments route money through a multi-party system: merchant acquirer, card scheme, and the cardholder's issuing bank. Each party sits between the payer and the payee and authorises the transaction. A2A payments move funds directly between two bank accounts, typically using domestic rails like Faster Payments in the UK or SEPA Credit Transfer in the EU. Cards typically settle T+1 or T+2 whereas A2A payments can settle instantly if they move through instant payment rails.
Can A2A payments support recurring billing?
Yes, through Variable Recurring Payments (VRPs). A VRP mandate is set up with a single SCA step and allows a merchant to pull future payments within pre-agreed limits (maximum amount per payment, maximum frequency). This makes A2A viable for subscriptions, utilities, and other recurring billing use cases. VRPs are live in the UK and expanding in Europe.
What is Authorised Push Payment (APP) fraud in the context of A2A?
APP fraud occurs when a fraudster tricks a payer into authorising a payment to the fraudster's account, through impersonation, fake invoice scams, or romance fraud. Because A2A payments are authenticated by the payer's own bank, the bank cannot distinguish a legitimate authorisation from one made under social engineering. UK regulators now mandate reimbursement for most APP fraud victims, and financial institutions are investing heavily in pre-payment fraud detection.
Revolutionize your business with PXP
Take complete control of your commerce and payments with one platform.
Get Started