How Account-to-Account Payments Work: Complete Guide

A grocery chain processing €80M annually pays €800K in card processing fees. With account-to-account payments, they’d pay €400K. That’s €400K in savings - every year.

The technology exists. The infrastructure is live. Banks can move money between accounts in seconds instead of days, at a fraction of card network costs.

But most business leaders don’t understand how A2A payments actually work. They know cards. They know traditional bank transfers. They don’t know there’s a third option that combines the convenience of cards with the economics of direct bank transfers.

Here’s the complete breakdown.

The 5-Step A2A Payment Flow

Step 1: Customer Initiates Payment

The customer triggers payment through one of seven methods:

Scanning a QR code at checkout (retail, restaurant, invoice)
Tapping their phone via NFC (point-of-sale, transit, vending)
Clicking a payment link (e-commerce, email invoice, social commerce)
Receiving a text message (conversational commerce)
Walking into a Bluetooth zone (drive-through, hands-free payment areas)
Having a barcode scanned (uses existing retail scanner infrastructure)
Hearing an audio signal (events, festivals, radio, TV, other media-triggered payments, drive-through locations)

Each method automatically opens the customer’s default banking app with a secure payment request. No intermediary screens. No manual navigation. The initiation method triggers the app to open directly with the payment details ready for authentication.

No card number is typed. No card data is transmitted. No PCI compliance infrastructure needed.

Step 2: Bank Authentication

The customer’s banking app asks for authentication as always.

Biometric authentication (fingerprint, face recognition)
PIN or password
Two-factor authentication (SMS code, authenticator app)

This is Strong Customer Authentication (SCA) - bank-level security that cryptographically proves the customer authorized the payment.

The merchant never receives banking credentials. The payment network never stores authentication data. The customer authenticates directly with their bank using existing, trusted methods.

Step 3: Payment Authorization

Once authenticated, the customer sees a payment confirmation screen showing:

Merchant name
Payment amount in their currency
Which account will be debited
Any payment reference or invoice number

They tap “Confirm” or “Decline.”

If confirmed, the bank authorizes the payment and locks the funds in the customer’s account. The authorization is cryptographically signed - it can’t be disputed that the customer approved this specific payment.

Step 4: Money Movement

The payment moves directly from the customer’s bank account to the merchant’s bank account through existing instant payment infrastructure:

SEPA Instant Credit Transfer (Europe - 36 countries)
FedNow or RTP (United States)
Faster Payments (United Kingdom)
PIX (Brazil)
UPI (India)

These are real-time payment rails that banks already support. The money doesn’t route through card networks. There are no intermediaries taking percentage cuts. It’s direct bank-to-bank transfer using standardized protocols (typically ISO 20022 messaging).

Step 5: Settlement Confirmation

Settlement completes in seconds - typically under 10 seconds from initiation to confirmation.

Both parties receive immediate confirmation:

Customer: Bank notification + merchant receipt
Merchant: Payment confirmed, funds available in account

The money is actually in the merchant’s account. Not “pending.” Not “held for 2-3 business days.” Actually settled and available.

For merchants, this transforms cash flow. Same-day revenue becomes same-second revenue.

How This Differs From Card Payments

Modern card payments have evolved significantly. In-person, customers tap cards or phones (Apple Pay, Google Pay) at NFC terminals. Online, saved cards and one-click checkout have streamlined the experience. The customer-facing UX is smooth.

But the underlying infrastructure and economics haven’t changed:

Card Payment Process (Behind the Scenes)

Customer taps card/phone at NFC terminal OR uses saved card online OR manually enters card details
Card data (or token) transmits through payment gateway (encrypted)
Gateway sends to payment processor
Processor routes to card network (Visa/Mastercard)
Card network routes to issuing bank
Issuing bank checks balance, fraud rules, authorization limits
Authorization response (approved/declined) travels back through chain
If approved, merchant receives authorization (not settlement)
At end of day, transactions batch settle
Money moves from issuing bank → card network → acquiring bank → merchant
Settlement completes in 2-3 business days
Merchant pays fees to every party in the chain

Customer experience: Fast and familiar.
Merchant reality: Multiple intermediaries, percentage fees, delayed settlement, PCI compliance requirements.

Cost breakdown on €100 transaction (European market):

Interchange fee (to issuing bank): €0.20-0.30 (capped by regulation)
Card network assessment: €0.10-0.15
Payment gateway/processor: €0.30-0.50
Acquirer markup: €0.20-0.30
Total merchant cost:
- Large merchants (high volume, negotiated rates): €0.80-1.25 (0.8-1.25%)
- Small/medium merchants (standard rates): €1.00-2.50 (1.0-2.5%)

Note: European interchange fees are regulated (0.2% debit, 0.3% credit caps), but gateway, processor, and acquirer fees vary significantly by merchant size and negotiating power. SMBs typically pay higher effective rates.

A2A Payment Process

Customer scans/taps/clicks to initiate → banking app opens automatically
Customer authenticates with bank (SCA)
Bank authorizes and locks funds
Money moves bank-to-bank via instant payment rail (direct bank-to-bank transfer)
Settlement completes in seconds
Both parties receive confirmation

Cost breakdown on €100 transaction:

Payment network fee: €0.50
Total merchant cost: €0.50 (0.5%)

Savings per €100 transaction:

Large merchants: €0.30-0.75 (37-60% reduction)
Small/medium merchants: €0.50-2.00 (50-80% reduction)

Why the Cost Difference?

Card networks charge percentage fees because they can. Network effects, decades of merchant adoption, and lack of alternatives created pricing power.

But moving money between bank accounts doesn’t actually cost 2-3%. The infrastructure exists. Banks already move money for ACH, wire transfers, and instant payments at flat fees or basis points.

A2A payments price based on actual infrastructure costs, not network pricing power.

Where Cards (Including NFC and Tokens) Fall Short

Card payments have evolved with NFC contactless and tokenization improving customer experience. But cards remain limited to specific contexts:

What cards do well:

Point-of-sale with card terminal (tap card or phone)
E-commerce with saved cards (one-click checkout)
Recurring billing with card on file

What cards can’t do:

Conversational commerce: Can’t send a payment link via WhatsApp/SMS that works without entering card details
Media-triggered payments: Can’t initiate payment through audio signals during radio, podcast, or TV content
Walk-through checkout: NFC requires tapping a terminal; can’t create hands-free payment zones with configurable range (drive-through, smart retail)
Printed invoice payments: Customer can’t tap phone on paper invoice; needs card terminal or manual entry
Temporary event infrastructure: Setting up card terminals at festivals/events requires hardware, connectivity, compliance
Barcode-integrated payments: Existing retail scanners can’t process cards; would need separate card terminals

The A2A advantage:
A2A isn’t just “cards with lower fees.” It enables payment in contexts where card terminals don’t exist, NFC doesn’t work, and asking for card details creates friction. Seven initiation methods mean payment infrastructure adapts to the context, not the other way around.

Cards and A2A will coexist. Cards excel where they’re established. A2A opens contexts cards can’t practically serve.

How This Differs From Traditional Bank Transfers

“Wait,” you might be thinking, “banks have always been able to transfer money between accounts. What’s new here?”

Traditional bank transfers (ACH in US, SEPA standard in Europe, BACS in UK) work well for invoicing and B2B payments. But they weren’t built for consumer checkout:

Traditional Bank Transfer Problems

User experience: Customers would need to know merchant’s bank account number, routing code, payment reference. Then log into their own banking, enter all details, initiate transfer. Not practical at checkout.
Speed: ACH takes 1-3 business days. SEPA standard takes 1 business day. BACS takes 3 days. Too slow for commerce where customers expect instant confirmation.
Confirmation: Merchant doesn’t know payment is coming until it arrives. No instant confirmation means no instant order fulfillment.

A2A Payment Solutions

User experience: Scan QR, tap phone, click link. One-step initiation. No typing account numbers. No logging into separate banking app. Payment-optimized flow.
Speed: Instant payment rails (SEPA Instant, FedNow, RTP) move money in seconds. Customer gets instant confirmation. Merchant gets instant settlement.
Confirmation: Cryptographic proof of authorization at initiation. Merchant knows payment is guaranteed before fulfillment begins.

Same underlying technology (banks moving money between accounts), but rebuilt for commerce instead of back-office transfers.

Why This Works Now (When It Didn’t Before)

A2A payments for commerce required three things to converge. All three exist today:

1. Instant Payment Infrastructure

Countries built real-time payment rails over the past decade:

SEPA Instant (Europe): Launched 2017, now processes 14% of all SEPA transfers
FedNow (US): Launched July 2023, growing bank participation
RTP (US): Launched 2017 by The Clearing House
Faster Payments (UK): Launched 2008, now 95% of UK payments by volume
PIX (Brazil): Launched 2020, now 60% of Brazilian transactions

These rails move money in seconds instead of days. Without instant settlement, A2A payments aren’t practical for commerce. With it, they work as well as cards.

2. Mobile Banking Adoption

In 2010, most consumers didn’t have smartphones. In 2015, most didn’t use mobile banking regularly. In 2025, 85%+ have smartphones and 70%+ use mobile banking weekly.

Consumers are comfortable authenticating with their bank digitally. They trust their bank’s security. They know how to approve transactions through banking apps.

That trust and familiarity is essential. A2A payments only work if consumers trust bank authentication.

3. Strong Customer Authentication Standards

Banks invested in Strong Customer Authentication infrastructure for electronic payments:

Biometric authentication (fingerprint, facial recognition)
Multi-factor authentication (something you have + something you know)
Cryptographic proof of authorization
Fraud detection and risk-based authentication

These technologies didn’t exist - or weren’t standardized - 15 years ago. Now they’re table stakes for banking security.

When instant rails + mobile banking + SCA converged, direct bank-to-bank payments became practical for everyday commerce.

Note: While regulations like PSD2 in Europe accelerated adoption of authentication standards, A2A payments work through direct bank partnerships independent of specific regulatory frameworks. Banks can enable A2A whether operating under PSD2, PSD3, or their own infrastructure.

Real-World Economics: What Merchants Actually Save

Let’s look at concrete examples:

Example 1: Regional Grocery Chain

Annual card volume: €80M
Current card fees (1.0% average): €800,000
A2A fees at 20% adoption (0.5%): €720,000
Annual savings: €80,000

At 30% A2A adoption: €120,000 saved annually
At 40% A2A adoption: €160,000 saved annually

Example 2: E-commerce Retailer

Annual card volume: €25M
Current card fees (1.2% average): €300,000
A2A fees at 25% adoption (0.5%): €256,250
Annual savings: €43,750

Plus: Reduced fraud losses (€40K+), eliminated expired card failures (€20K recovered revenue)
Total impact: €105K+ annually

Example 3: SaaS Subscription Business (Mid-Size)

Annual card volume: €12M
Current card fees (1.1% average): €132,000
A2A fees at 40% adoption (0.5%): €103,200
Annual savings: €28,800

Plus: 15% reduction in involuntary churn from expired cards (another €150K recovered revenue)
Total impact: €180K+ annually

Example 4: Independent Restaurant Chain (Small Merchant)

Annual card volume: €2M
Current card fees (2.2% average - SMB rates): €44,000
A2A fees at 15% adoption (0.5%): €38,500
Annual savings: €5,500

At 25% A2A adoption: €10,200 saved annually
At 35% A2A adoption: €14,280 saved annually

The pattern:

Large merchants (€80M+) save six figures with moderate adoption
Mid-size businesses (€10-25M) save five figures plus operational benefits
Small merchants (€1-5M) see 50-80% fee reduction on A2A volume - meaningful impact even at lower absolute amounts
High-adoption verticals (subscriptions) benefit more from reduced churn than fee savings alone

Real-World Economics: What Payment Institutions Gain

Banks offering A2A to merchants:

Merchant Retention Value

Losing a $50M/year merchant to a competitor costs:

$200K+ annual revenue (processing fees, business banking, treasury services)
Relationship depth with a significant business customer
Potential ripple effect (other merchants follow)

Offering A2A as retention tool:

Reduces merchant churn risk
Deepens relationship through technical integration
Positions bank as innovative vs reactive

A2A Revenue Opportunity

Transaction fees are lower than cards, but:

Capture new volume (merchants using A2A where they used cards)
Participate in growing market (A2A volume growing 40% YoY in progressive markets)
Revenue from existing infrastructure (instant payment rails already built)

Competitive Positioning

Early bank movers differentiate:

“Seven payment initiation methods” vs competitors offering only cards
“Instant settlement” vs competitors with 2-3 day holds
“0.5% fees” vs competitors at 2-3%

These aren’t marginal advantages. They’re material differences merchants care about.

Adoption Reality: What Actually Happens

When merchants add A2A as a payment option (alongside cards, not replacing):

Months 1-3: Early Adoption (2-5%)

Tech-savvy customers try it
Younger demographics (under 35) more likely to use
Mobile shoppers higher adoption than desktop
Initial adoption driven by early adopters

Months 6-12: Growing Adoption (10-15%)

Word of mouth from early users
Customer education through checkout prompts
Trust builds through positive experiences
Merchants refine placement and messaging

Year 2: Mainstream Adoption (15-25%)

Becomes “normal” payment option
Adoption varies by merchant vertical (subscriptions higher, one-time purchases lower)
Geographic variation (markets with mature instant payment infrastructure see higher adoption)

Year 3+: Mature Adoption (25-40%)

Plateaus at equilibrium based on use case fit
Cards remain dominant for: international payments, credit-based purchases, high-value one-time transactions
A2A dominant for: domestic recurring payments, high-frequency low-value transactions, subscription renewals

Cards don’t disappear. A2A captures share in contexts where economics and UX make it preferable.

Even 25% A2A adoption reduces merchant average payment costs from 2.5% to 2.0% - meaningful margin improvement with no operational downside.

Common Questions

”Do customers trust paying from their bank account?”

Trust varies by demographic and geography:

High trust:

Age 18-45 (grew up with digital banking)
Markets with mature mobile banking (UK, Nordics, parts of Asia)
Customers already using bank apps for transfers

Building trust:

Age 45+ (need education, follow younger cohorts over time)
Markets with newer mobile banking adoption
Customers primarily using cards (need positive first experiences)

Trust isn’t binary. It builds through:

Clear merchant explanation (“Pay directly from your bank - more secure than card numbers”)
Familiar bank branding during authentication
Positive first experience (fast, easy, works as promised)
Social proof (seeing others use it successfully)

“What if the customer’s bank doesn’t support instant payments?”

Infrastructure coverage varies by market:

High coverage (85%+ of accounts):

UK (Faster Payments)
Europe (SEPA Instant growing rapidly)
Brazil (PIX)
India (UPI)

Growing coverage (40-70% of accounts):

United States (FedNow + RTP adoption accelerating)
Other markets building instant payment rails

In markets with incomplete coverage, A2A works for customers whose banks support it. Others use cards. As instant payment infrastructure reaches more banks, addressable customers grow.

This is why progressive markets see higher A2A adoption - infrastructure enables it.

”How hard is integration?”

For merchants:

E-commerce: immediate with plugins (WooCommerce, Magento, PrestaShop, and other open-source platforms)
Custom checkout: 1-2 weeks with direct API integration
Point-of-sale: Depends on POS system (major systems have integrations)

For payment institutions:

Full integration: 2-5 months
Includes: Technical integration, compliance review, security certification, sandbox testing, merchant enablement tools, go-to-market planning
Team: 5-8 people part-time (technical, compliance, product, merchant support)

Integration complexity depends on starting point. Banks with modern infrastructure integrate faster. Legacy systems take longer.

”What about chargebacks and fraud?”

Chargebacks:
Dramatically reduced vs cards. Bank authentication cryptographically proves customer authorized the payment.

Chargebacks still exist for:

Non-delivery of goods/services
Goods significantly different from description
Unauthorized account access (customer’s device stolen)

But “I didn’t make this purchase” disputes essentially disappear. That’s 60-70% of card chargebacks eliminated.

Fraud:
Different fraud patterns vs cards:

Card fraud: Steal card number → use it → hope it’s not detected quickly
A2A fraud: Need customer’s device + biometric/PIN → much harder

Account takeover fraud exists but at significantly lower rates than card number theft. Banks’ existing fraud detection (unusual payment patterns, device fingerprinting, velocity checks) catches most attempts.

Net result: 95% lower fraud dispute rates vs card payments.

”Can merchants still offer cards?”

Yes - and they should.

A2A doesn’t replace cards. It complements them. Merchants offering both:

Give customers choice (some prefer cards, some prefer A2A)
Maintain international payment acceptance (A2A is currently domestic-only in most markets)
Support credit-based purchases (A2A is debit-only)
Provide redundancy (if one method has issues, the other works)

Best practice: Offer A2A alongside cards. Let customers choose. Average payment costs drop as A2A captures share of high-frequency domestic transactions while cards handle international and credit-based volume.

Why payware Built Universal A2A Infrastructure

Most A2A payment providers support one or two initiation methods - usually QR codes or payment links. That works for specific use cases but not others.

The context problem:

Retail checkout: QR codes or NFC work well (customer can scan or tap)
Drive-through: QR codes awkward (hands on wheel), BLE proximity or audio signals work better (automatic detection)
E-commerce: Payment links work well (click to initiate)
Live events/festivals: Audio signals (soundbite) work better than QR (broadcast to audience, no need to display individual codes)
Media and broadcasting: Audio signals enable payment during radio, podcast, or TV content (triggered by sound)
P2P payments: SMS-based links work better than QR (share via text conversation)
Vending machines: Static QR codes or BLE proximity (unattended locations without screens)

Different commerce contexts need different initiation methods.

We built payware as universal infrastructure supporting seven initiation methods:

QR codes - Visual scanning for retail, invoices, events
NFC contactless - Tap-to-pay at terminals
BLE proximity - Automatic detection in physical zones (hands-free, configurable range)
Payment links - Click-to-pay via messaging, email, social
SMS initiation - Text-based payment without apps
Barcode scanning - Compatible with existing retail infrastructure
Soundbite audio signals - Audio broadcast technology for media, events, radio, TV

The underlying flow is identical (banking app opens automatically → customer authenticates → direct bank transfer → instant settlement). The initiation method adapts to the context.

Payment institutions integrating with payware can offer all seven methods to customers. Merchants choose which methods fit their use cases. Customers use whichever method the merchant supports.

Universal infrastructure means banks don’t need to integrate different A2A providers. One integration, seven payment initiation methods, all merchants served.

What This Means for the Industry

Account-to-account payments won’t replace cards in the next five years. But they’re following a predictable adoption curve that similar payment infrastructure followed:

2020-2025: Infrastructure Building Phase

Instant payment rails deployed
Early A2A providers launch
Pioneer merchants and banks adopt
Adoption: 0-10% in progressive markets

2025-2030: Mainstream Adoption Phase

Infrastructure matures
Consumer awareness grows
Competitive pressure drives bank adoption
Adoption: 10-40% in progressive markets, 5-20% in emerging markets

2030-2035: New Equilibrium

Cards stabilize at 50-70% of volume (international, credit, high-value)
A2A captures 30-50% of volume (domestic, debit, recurring)
Both methods coexist based on use case fit
Total merchant payment costs 40-60% lower than card-only era

This isn’t speculation. It’s pattern recognition from how payment infrastructure changes:

Cash → cards took 30 years (1970-2000)
Magnetic stripe → chip took 15 years (2000-2015)
In-person → e-commerce payment adoption took 20 years (1995-2015)

A2A adoption will be faster because:

Infrastructure already exists (instant payment rails live)
Trust foundation exists (mobile banking adoption)
Economics are compelling (75-85% cost reduction)

The technology works. The question is adoption timing and which businesses position themselves early.

Next Steps

For payment institutions: Evaluate A2A integration as merchant retention strategy. The economics favor early movers (better network positioning, favorable terms, competitive differentiation).

For merchants: Understand A2A economics for your business. Even 20% adoption produces meaningful cost savings. Implementation is straightforward with modern e-commerce platforms and POS systems.

For both: The choice isn’t whether A2A payments become standard. The choice is whether you integrate proactively or reactively.

Want to explore A2A payments for your business?

payware provides universal A2A payment infrastructure with seven initiation methods, instant settlement, and 0.5% flat fees. We work with payment institutions to enable A2A for their merchant portfolios and directly with large merchants for custom integrations.

Learn more: payware.eu
Contact: Get in touch

About payware

payware is the neutral universal interoperability standard for instant account-to-account (A2A) payments worldwide. The platform enables payment institutions, merchants, ISVs, and developers to join a network where every connection multiplies value for all participants. With 7 innovative payment initiation methods - QR code, NFC, BLE, soundbite, text, link, and barcode - payware delivers exceptional end-user experiences while offering fees as low as 0.5% and instant settlement. Founded in 2019, payware creates unprecedented value through universal domestic interoperability.

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