Competition in payments: the rise of A2A payments and the role of regulation

7 November 2022

Innovation is enabling new types of payments and creating a truly dynamic ecosystem. Yet in order to create a market where new schemes like Account-to-Account payments can compete, regulation must play a central role argues Esther Groen, Head of Payments Consulting at Icon Solutions.

Payments modernisation is a hot topic right now—and for good reason. New and innovative digital payment technologies and instruments are emerging constantly, sharpening competition across the payments landscape.

The advent of open banking and Application Programming Interfaces (APIs) has unlocked access and connectivity options, creating links between banks, fintechs and platforms and enabling the direct flow of money from one account to another. Innovation has paved the way for the rise of these account-to-account (A2A) payments, sharpening competition by introducing point of sale (POS) payments that no longer require credit card rails.

A2A payments have been around for a while in Sweden (Swish) and the Netherlands, where the iDEAL payments system was created in response to the growth of online shopping by a group of Dutch banks. Since then, iDEAL has emerged as a dominant payment system, accelerating the uptake of real-time payments across the Netherlands and driving a surge that is only expected to grow in the coming years.[1] Elsewhere in Europe, the SEPA Credit Transfer (SCT) scheme enables the quick transfer of funds from one account to another within the SEPA zone.

Despite the success of iDEAL and SCT, real-time payment schemes are still relatively new in the rest of Europe and North America. So, what will it take for these fast, low-cost and versatile schemes to transform payments in the rest of the world?


A2A payments have the potential to dethrone card-based payments and make the ecosystem even more competitive—but only if regulation keeps pace with the innovation and creates the right conditions for competition to flourish.

In the simplest terms, credit card transactions and A2A payments are separated by the services that issuing banks offer their customers that other banks can’t or don’t: revolving credit, the ability to dispute transactions, and insurance against loss in the event of fraud.

Yet these services are extended at a steep price, requiring merchants and customers to pay high interchange fees in exchange for the promise of security and reimbursement of fraudulent transactions. Without regulation of A2A payments schemes, non-issuing banks simply won’t be able to offer the full range of services and guarantees—like security—that would allow them to compete with cards.

A2A payments are a much more efficient way to pay since the accounts settle in real time. In a truly competitive market, consumers would be able to access card-based payments and A2A payments for the same price. Friction would be removed, interchange fees would decrease and A2A rails could provide infrastructure that enables even more new ways to pay using innovative technologies like QR codes and wallets.

In Europe, Strong Customer Authentication (SCA) serves as a helpful illustration of how regulatory action can support A2A payment schemes. Designed to reduce fraud and make online and contactless payments more secure, SCA requires that additional authentication via two methods be built into checkout transactions. This means that a consumer must use at least two of the following: a password or pin, biometric identification, or hardware verification or a token. By requiring this additional layer of security, regulators have inadvertently allowed A2A payments to compete with card-based payments by providing frictionless payment experiences that are still highly secure.

The United Kingdom understands the need for regulatory action and has undertaken two key initiatives to boost the use of A2A payments. The Treasury, Financial Conduct Authority (FCA) and the Payment Systems Regulatory (PSR) are creating a new regulatory body to oversee open banking and A2A payments. The PSR and FCA are also proposing new regulations aimed at curbing fraud for introduction into parliament.

The EU is not far behind, promising regulatory action for real-time payments in the coming months. The European Central Bank has also urged the European Payments Council to accelerate the updating of existing instant payments using the SEPA Instant Credit Transfer Scheme. Meanwhile, in the United States, the Federal Reserve is considering regulations to govern FedNow, its own RTP scheme.

It remains to be seen whether any of these regulatory actions will be enough to give A2A payment schemes the leg up needed to topple the cards’ domination and level the playing field. Let us hope so.





Esther Groen