Account-to-account payments
Cardflo facilitates account-to-account (A2A) payments, enabling direct transfers between customer and merchant bank accounts. This method offers a cost-effective and secure payment alternative, bypassing card schemes and their associated fees.
It provides real-time settlement and reduces fraud exposure, benefiting high-risk and enterprise operations.
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The overview
Account-to-account (A2A) payments represent a direct method of transferring funds from a consumer bank account to a merchant account without the intermediation of card schemes.
By bypassing the traditional rails provided by Visa and Mastercard, these transactions avoid cumulative interchange and scheme fees, resulting in a lower cost of acceptance for high-volume or high-ticket enterprises.
The mechanism typically relies on open banking infrastructure, where the payer authorises the transaction through their own banking application. This process uses existing bank-grade security and Strong Customer Authentication (SCA) to verify identity, which inherently reduces the risk of unauthorised transactions.
From an operational standpoint, A2A payments occupy a critical position in the payments stack by offering real-time or near-real-time settlement cycles, particularly through systems like Faster Payments in the UK or SEPA Instant in Europe.
This improves liquidity management and reduces the time funds remain in transit between the acquirer and the merchant bank account.
How it works
Initiation at Checkout
The customer selects the bank transfer option at the point of sale. The merchant gateway generates a secure request to an open banking provider, which then presents a list of supported financial institutions.
The user selects their bank, triggering a redirection to their native mobile banking application or online portal.
Authentication and Authorisation
The bank validates the user identity through biometrics or two-factor authentication, satisfying PSD2 requirements. The transaction details, including the exact amount and recipient merchant ID, are pre-populated to prevent manual entry errors.
The user confirms the payment within their bank's secure enviornment to authorise the transfer.
Real-time Fund Transfer
Upon authorisation, the bank initiates a credit transfer through regional clearing systems. Unlike card payments that involve complex authorisation and capture phases, A2A transfers move liquidity directly.
The bank issues a real-time notification to the payment service provider, confirming that the instruction has been successfully queued for settlement.
Status Update and Reconciliation
The gateway receives the payment confirmation and updates the transaction status in the merchant dashboard. Because the funds arrive via credit transfer, the reconciliation process is simplified.
The merchant receives the full transaction value, minus the flat service fee, typically arriving in the bank account within seconds.
Why it matters
Reduction in Transaction Overheads
Traditional card processing carries a stack of costs, including interchange, scheme fees, and acquirer margins. Account-to-account payments operate on a flat-fee or lower percentage basis because they do not utilise the expensive infrastructure of credit card networks.
For businesses managing thin margins or high transaction values, this structural change significantly reduces the overall cost of payment acceptance over time.
Elimination of Chargeback Risk
A2A payments are executed as push payments, meaning the customer initiates the transfer. Unlike card payments, where merchants face the risk of chargebacks and associated fees, A2A transfers are generally final once authorised by the bank.
This provides merchants with greater certainty of settlement and eliminates the administrative burden and financial loss associated with representment and dispute management.
Optimised Working Capital
Standard card settlements can take between two and seven days to reach a merchant bank account, often subject to rolling reserves. A2A payments leverage instant clearing rails, allowing for immediate access to liquidity.
This faster velocity of money enables businesses to reinvest capital more quickly, improve cash flow forecasting, and reduce reliance on credit facilities for daily operations.
Use cases
High-Value E-commerce
Retailers selling luxury goods or electronics use A2A to avoid high percentage-based fees on large tickets, while ensuring immediate payment confirmation before dispatching valuable physical inventory.
Regulated Financial Services
Investment platforms and wealth management firms utilise bank transfers for wallet funding to ensure compliance with AML directives and to avoid the deposit limits often associated with debit cards.
Subscription and Recurring Billing
Businesses providing utilities or software-as-a-service integrate A2A as a lower-cost alternative to recurring card payments, reducing churn caused by expired or lost card credentials.
Professional Service Providers
Legal firms and consultancies use A2A payment links to facilitate rapid invoice settlement, ensuring that client funds are transferred securely without manual bank details entry.
By the numbers
This represents the typical reduction in processing fees when comparing A2A to standard credit card merchant service charges.
Based on clearing through UK Faster Payments or SEPA Instant, though actual availability depends on the participating banks.
Industry data indicates a near-total elimination of traditional chargebacks, as push payments rarely allow for non-fraudulent reversals.
Related terms
Talk to our team about a live rollout on your acquiring stack.
What you get with Account-to-account payments
- Direct bank-to-bank transfers bypassing the traditional card scheme networks and associated overheads.
- Significant reduction in processing costs through the removal of interchange and scheme fee components.
- Adherence to Strong Customer Authentication standards through native banking app biometric verification.
- Near-instantaneous settlement of funds improving corporate liquidity and operational cash flow management.
- Minimal risk of chargebacks due to the nature of authorised push payment mechanics.
- Pre-populated payment details reducing the likelihood of manual entry errors and misdirected funds.
- Enhanced security as sensitive card data is never shared or stored during the transaction.
- Higher transaction limits compared to standard consumer debit or credit card daily caps.
- Lower bounce rates for high-value transactions that might otherwise trigger card issuer fraud blocks.
- Simplified reconciliation through direct integration with banking APIs and real-time status notifications.
A short scoping call, then a written plan for your MIDs.
Questions about Account-to-account payments
How do account-to-account payments differ from traditional bank transfers?
Traditional bank transfers often require the customer to manually enter a sort code, account number, and reference, which is prone to human error and difficult for merchants to reconcile. Account-to-account payments, facilitated via open banking, automate this process.
The payment details are pre-filled by the merchant's payment service provider, and the customer only needs to authorise the transaction. This ensures that the exact amount is sent with the correct reference, allowing for automated reconciliation and immediate order fulfilment.
What are the primary cost advantages of A2A over card processing?
Card processing involves multiple intermediaries, each taking a fee: the issuer receives interchange, the schemes (Visa/Mastercard) take a fee, and the acquirer adds a margin. For high-risk or high-value merchants, these costs escalate quickly.
A2A payments operate on a flat fee or a significantly lower percentage because they utilise the bank's own clearing systems. By removing three or four layers of fees, merchants can often reduce their total cost of acceptance by 50% or more.
Can A2A payments be used for recurring billing or subscriptions?
Yes, A2A payments can support recurring transactions through mechanisms like Variable Recurring Payments (VRP) or scheduled credit transfers. Unlike card-on-file transactions, which often fail due to card expiry, loss, or theft, A2A links directly to the underlying bank account.
As long as the account remains open and funded, the payment can proceed. This reduces involuntary churn and the need for account updater services that are common in the card industry.
Is the refund process different for A2A transactions compared to cards?
Refunds for A2A payments are typically handled via a credit transfer back to the original bank account. While the initial payment is a 'push' from the customer, the merchant can initiate a reverse transfer through their payment provider's API.
Because the payment provider has the original account details from the inbound transaction, they can automate the return of funds, providing a similar experience to a card refund but without the scheme-specific reversal rules.
How does A2A affect payment abandonment rates at checkout?
Initially, abandonment may be slightly higher if customers are unfamiliar with the flow, but this is offset by the success rates of high-value transactions.
Since A2A uses the bank's own authentication, there is no risk of a 'soft decline' due to 3DS issues or card issuer fraud filters.
For high-ticket items that often trigger card blocks, A2A provides a more reliable path to completion, often resulting in higher overall conversion for specific merchant tiers.
What regulatory frameworks govern account-to-account payments in the UK and EU?
A2A payments are primarily governed by the Second Payment Services Directive (PSD2), which mandated that banks provide Secure Customer Authentication and open up their APIs to third-party providers. In the UK, this is further supported by the Open Banking Standard.
The upcoming PSD3 is expected to further refine these requirements, improving API uptime and standardising the user experience across different financial institutions to ensure more consistent transaction success rates.
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