You may have heard the term “A2A payments” getting thrown around by banks or payment processors.
But what are they, and would they make sense for your business? To help you answer those questions, our money movement experts at Orum have put together this guide.
- What counts as an “A2A payment”?
- What are the different types of A2A payments?
- How can your business benefit from accepting money as A2A payments?
- How can consumers and individuals benefit from access to A2A payments?
- Are A2A payments even safe to use?
- What is the future of A2A payments?
What are A2A payments?
Account-to-Account (A2A) payments are, as the name suggests, electronic money transfers from one bank account into another.
Key characteristics include:
- Direct transfers between bank accounts: A2A payments typically do not involve credit or debit cards. Instead, they are sent directly between bank accounts using account information.
- Electronic money movement: A2A payments are always digital, unlike cash or paper checks.
However, the term “A2A” can refer to a few different types of payments:
- Peer-to-Peer (P2P): money sent between the bank accounts of two individuals, typically friends or family.
- Consumer-to-Business (C2B): money sent from an individual to a business, typically a merchant.
- Business-to-Consumer (B2C): money sent from a business to an individual, potentially as wages or refunds.
- Business-to-Business (B2B): money sent between accounts of separate business entities, typically for products and services.
- Me-to-Me: money sent between the bank accounts of the same individual or business entity, typically in different financial institutions.
In this guide, we will be using the term “A2A” to refer to any electronic movement of money between the bank accounts of different individuals or entities (P2P, C2B, B2C, or B2B).
Account-to-account payment types
Since the term A2A payments encompasses quite a broad range of transactions, there are multiple possible methods of moving money that we should cover.
Let’s take a look at the common payment types available in the US today.
Push payments vs. pull payments
First, transactions can be classified as either “push” or “pull” payments, independent of what payment method is being used to move that money:
- Push payments (credit): sender initiates the transfer, pushing money out of their account to the recipient’s
- Pull payments (debit): receiver initiates the transfer with the sender’s prior authorization, pulling money out of the sender’s account
The Automated Clearing House (ACH) network is one of the most popular methods of moving money in the US.
All ACH transfers are fully electronic. This payment rail is available for every single bank account in the country. Additionally, ACH is typically one of the cheapest payment options.
The ACH network supports both push and pull payments, as well as three different payment speeds:
- Standard ACH (3-5 business days)
- Next Day ACH (1 business day)
- Same Day ACH (<1 business day)
To learn more about what is an ACH payment and the differences between the available options, you can read our dedicated guide.
Real-Time Payments (RTP) network is one of the newest payment rails in the country.
Unlike other rails, RTP can clear and settle transactions nearly instantly (typically within seconds or minutes).
Because money becomes available to the receiving party right away, all transactions are final and irreversible.
All payments sent via the RTP network also store a variety of data useful for reconciliation and bookkeeping.
What are the benefits of Account-to-Account payments?
You can’t avoid having to move money to other parties, whether they are businesses or individuals. So, whenever your business has to decide how you’re going to move money, you should consider using A2A payments instead of cards, cash, or checks.
Below are some key benefits that you may wish to consider when deciding whether to implement one of the A2A payment rails for your transactions.
Benefits for merchants
As a merchant, you could experience the following advantages from A2A payments:
- Reach More Clients: online payments have become an essential part of our lives ever since the pandemic and the rapid rise of remote work. If you want to expand your market share beyond your local market or physical store, you should be accepting A2A payments.
- Increase Conversion Rates: most modern implementations of A2A payment rails are extremely convenient. Your customers can easily pay from whatever device they have on hand without worrying about walking anywhere or buying stamps. By improving user experience, you may see more customers completing their checkout.
- Keep Transaction Costs Low: card networks charge you a percentage value of each completed transaction. Especially with credit cards, those fees can easily eat into your revenue stream. By accepting bank payments, you can decrease those transaction costs and lower operating expenses.
- Instant Settlements: most modern A2A payment rails are quite fast. Networks like RTP will make your money available instantly, while Same Day ACH still arrives within the same working day. With faster processing time, you can regain control over your cash flow without resorting to cash.
Benefits for consumers
By allowing consumers to pay you or accept money via A2A payments, you are helping them experience the following benefits:
- Enhanced User Experience: consumers can easily send money from their web browser or mobile app on whatever devices they prefer. In addition, you can let them link their bank account with your application, so they will never have to remember and manually type out their card or bank account details when sending money.
- High Level of Security: most A2A payments require some type of multifactor authentication (MFA) whether as a one-time passcode on their phone number or by using biometric confirmation such as Face and Touch ID. Thanks to these security measures, payment fraud is a lot less likely and consumers can move money without worrying about it being lost or stolen.
Are A2A payments safe?
While A2A payments are not immune to fraud and abuse, they are actually a lot more safe than other ways of moving money.
A2A payments are significantly more safe than paper checks. The AFP 2022 Payments Fraud Report found that 66% of organizations were affected by check fraud, while only 37% dealt with ACH debit fraud. Even better, only 5% of respondents were targeted through more modern A2A payment rails (Same-Day ACH, RTP).
In addition, A2A payments are a lot more safe for consumers than card payments. More than 35% of consumers who fell victim to payments fraud in 2022 had their money stolen through credit or debit cards, according to the Federal Trade Commission (FTC).
The future of A2A payments
So, where are we expecting A2A payments to go in the near future?
First, we are eagerly awaiting the launch of a brand new A2A payment rail. The United States Federal Reserve will be launching the FedNow service in 2023, making instant money transfers accessible to many more organizations and financial institutions.
Second, we are expecting to see real-time payments to catch on with many more businesses and consumers across the US. Federal Reserve consumer research found that 70% of consumers want faster payment access, so organizations around the country will be adopting new payment rails to meet these customer expectations.
Enjoy the many benefits of A2A payments with Orum.io
If you want to enable A2A payments for your organization, you can either contract with a bank or integrate with a payments API provider like Orum.
With Orum’s payment API, you can:
- Customize payment flows
- Control transaction speed and delivery
- Avoid costly fees
- Speed up integration time
- Incorporate the best payment rail for each of your use cases.
If you’re interested, learn more by scheduling a call with our team.