Why A2A will create a banking tech battle

The report says A2A transactions will grow from around 24% of all online payments in 2025 to nearly 40% by 2035, driven by increasing consumer adoption and rising merchant acceptance.

 THE FUTURE EVOLUTION OF ONLINE PAYMENTS  

While also forecasting that cryptocurrencies and stablecoins will play a bigger role in the future, the report argues that banks should begin to position their credit offering around A2A payments to win back market share from BNPL specialists and enhance the profitability of their payments business in the process. In other words, banks will want to position themselves for a more diverse future payments landscape.

What this means for banks – and payment technology

 
These developments will make low-friction customer checkouts and an outstanding customer experience an absolute must. The need to provide customers with clear yet broad options at checkout for instant A2A payments or card and wallet payments will be vital, as will the capacity to run payments over either card or A2A rails.

Consumers are looking for maximum speed, convenience and security, and are not going to change their payment method based on what’s on offer.

Failing to provide a checkout option that’s easy will lead to consumers choosing different merchants that accepts their chosen method. Likewise, consumers can easily switch bank if their original provider doesn’t offer BNPL, or can’t provide transparent FX rates.

 
By implication, a bank’s payment systems must be sufficiently flexible to adapt to any payment method a consumer prefers, ensuring security over all payment rails and securing API integrations with merchants and PSPs. Banks need to provide merchant checkouts that integrate easily with new payment rails and channels, as well as increasingly simple onboarding. To cater to consumer requirements as well as merchant needs, banks will be looking to offer highly flexible fee structures and product configuration opportunities. They will be helped in these goals by customer data enriched through new payment options like BNPL or digital wallets: banks should also enhance existing options by offering features such as greater transparency on foreign exchange rates.

In the future, bank systems will need to be far easier to configure and adjust, so that payment options can be integrated and dropped rapidly and without excessive testing, analysis and regrouping. In short, bank system features should be more like mobile apps, which can be downloaded, used and either adopted or discarded as needed. Likewise, value-added services such as fee adjustments, up-selling opportunities, data analytics and profitability analysis should all be easy to integrate and offer to merchants.

The first banks to adopt systems like these will benefit from significant early-mover advantages.

  For more on the future of European payments, download the report.