Innovate with A2A: Why bank payments are better than ever

At GoCardless, we have always believed that the best way to collect payments is by moving money directly from one account to another. 

Account to account (A2A) payments are not new. GoCardless, for example, has been specialising in A2A payments for almost 15 years and we have seen a lot of change in that time.

Most notably, the introduction of open banking in 2008. Open banking brings increased speed, security and significant cost savings for businesses to already powerful A2A payments. It has been steadily growing in adoption with now 15 million people in the UK using open banking, up from 10 million just last year. Developments this year are set to expand that growth and open up the use cases and potential applications for open banking payments even further.

Open banking: A new generation of A2A payments

Open banking is built on the same principles as existing A2A payments but makes them faster, more flexible and reliable than ever before. It allows for the collection of instant, one-off payments and, in some cases, flexible recurring payments.

Faster payments and fewer failures

Open banking uses API technology to "talk" directly to a customer's bank to verify their details and initiate a payment. By redirecting customers to their online banking, it requires them to verify upfront that they own the account they're paying with and that they authorise the payment. This significantly reduces fraud and the chance of a payment failing through rigorous verification.

Open banking payments use the Faster Payments rails, meaning they settle up to seven times faster than card payments and five times faster than traditional bank payments. This gives you peace of mind that you'll get your money quickly and gives your customers better visibility over their finances.

Cost savings

By offering a powerful alternative to card payments, open banking can help you cut down on card transactions and interchange fees. Businesses using our Instant Bank Pay feature, which is powered by open banking, have seen a 54% reduction in card fees.

Better customer experience

Open banking improves the customer experience in a number of ways. Redirecting customers to their online banking and using biometrics to authorise payments makes the journey super simple and secure. Payments are also instant, so customers know exactly where they stand.

What's next for open banking?

Variable Recurring Payments (VRPs) are the next big milestone for open banking payments. VRPs enable recurring account-to-account payments in a similar way to Direct Debit or card-on-file payments. The key difference is they are powered by open banking, which gives businesses the increased speed and security open banking offers. Businesses will also be able to vary the amount and timing of the payment.

This functionality is currently only available for "sweeping" payments, where a transaction is made between two accounts owned by the same person. The next step is commercial VRPs, which will allow payments to go from a customer's account to an account owned by a business. This will open up VRPs to a wide range of use cases for businesses in the utilities and ecommerce sectors, enabling them to use open banking in place of Direct Debit or card-on-file payments.

A2A payments are better than ever 

Open banking builds on existing bank payments by allowing payments to move directly from one account to another with increased speed, security and an improved customer journey. Until now, open banking has been best for businesses collecting one-off, large value transactions where it’s much cheaper and more efficient than the alternatives. 

Variable Recurring Payments (VRPs) offer the potential to collect recurrent payments for different amounts. This will throw the use cases for open banking wide open and transform A2A payments and the way we use them.

Find out more about VRPs and their roadmap.