Over the past few years, novel payment methods have emerged and quickly transformed the way we buy goods online and in physical stores. What’s more, the pace of their adoption and expansion across the world has highlighted the public’s tremendous appetite for flexibility and convenience.
One such solution that is steadily gaining popularity but is yet to realize its full potential is A2A payments. In this guide, we will explain why industry experts call this payment method a global megatrend and discuss the role PSPs are expected to play in its evolution.
With A2A payments, funds are transferred directly from one bank account to another. Although basic A2A payments have been in existence for a while, advancements in Open Banking have considerably improved the functionality, speed, and security of such solutions.
Due to these advancements, modern A2A transfers have the potential to decrease payment costs, minimize friction, and increase efficiency by eliminating the need for intermediaries, which is especially relevant now as businesses face macroeconomic pressures.
Yet, despite the promising forecasts and the potential benefits of A2A payments across various sectors, many still view them as an alternative payment method. As a result, merchants tend to opt for the ubiquity of card payments, oftentimes ignoring the fact that they entail much higher costs compared to A2A options.
Thus, for A2A payments to reach their full potential and truly reach scale, businesses need to have a better understanding of how they work and which benefits they offer.
One of the key goals of PSPs is to help businesses accept the appropriate payment methods for every market they operate in. This is particularly crucial when expanding across borders, which is a common growth strategy for European e-commerce merchants.
However, many PSPs are hesitant to offer alternative payment options like A2A transfers due to their unfamiliarity and prefer to rely on traditional payment options that are already in demand.
With that said, a significant number of merchants depend on PSPs for payment processing. Thus, if a payment method is unavailable through the PSP, it is often more challenging for merchants to provide it to their customers. In such a scenario, neither the PSP nor the merchant will fail to reap the benefits.
There is no doubt that the state of affairs described above has to change, as for PSPs that prioritize merchants' needs and are focused on addressing their key challenges, A2A payments are a logical choice. By embracing A2A transfers, PSPs can be among the "first movers" in the market and address such major merchant pain points as:
What’s more, there is clear evidence of how significant the impact of novel payment solutions can be when PSPs adopt them, as seen with BNPL in recent years.
Therefore, PSPs are crucial aggregators for merchants and payment providers, and powerful advocates for A2A transfers. Their unique role in the ecosystem makes them a crucial piece of the puzzle for introducing a new category of payments to the market.
While A2A is expected to spread across a variety of spheres in the long run, it may gain quicker adoption in sectors with specific and strong use cases, similar to BNPL in the retail fashion industry.
Thus, it’s highly advisable for PSPs to focus on meeting the unique needs of their clients within specific sectors. For instance, A2A payments are a perfect match for rapidly-evolving spheres like marketplaces and the gig economy.
Given the increased security, faster transaction times, and improved user experiences, A2A payments offer a compelling value proposition. By offering them to merchants, PSPs can position themselves as leaders in the industry and drive growth for their businesses. The time to act is now, and those who fail to do so risk being left behind in a rapidly changing payments landscape.
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