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Visa has announced plans to launch a proprietary solution for account-to-account (A2A) payments in the UK, with support from major banks and fintechs.
The card giant will introduce Visa A2A in the UK in early 2025, in an effort to give consumers greater flexibility and stronger protections when paying by bank transfer.
Visa is promising a “smarter” user experience, advanced security features and an “easy-to-use” dispute resolution service.
Although it is still unclear how the dispute resolution service will work, the company said it will be a “significant upgrade” on current pay-by-bank offerings, and will help consumers recoup their money back if something goes wrong.
“A formal dispute resolution process will provide consumers with a reliable way to check transactions, while innovations such as biometrics will add a new level of security resulting in fewer unauthorised transactions,” it said.
A growing market for A2A payments
Visa pointed to the UK’s growing volume of A2A transactions via Faster Payments — a trend that is expected to continue.
In 2023, Britons made £3.7trn in A2A transactions via Faster Payments, a 15 percent increase over the previous year, according to Faster Payments operator Pay.UK.
However, Visa noted that the payment of bills and subscriptions through bank transfers remains “largely unchanged” since the launch of direct debit 60 years ago.
“This can make it harder for consumers to manage their finances using a service designed in a pre-digital age, which in many cases still requires manual processes and has limited, outdated consumer safeguards,” the company said.
“This affects consumers, businesses and the wider UK economy. In fact, billions of pounds are lost or withheld from consumers due to problems such as unauthorised auto-renewals or the lack of flexibility around bill payments.”
In 2023, for example, energy regulator Ofgem published data showing that UK suppliers collectively held £8.1bn in bill overpayments from customers at the beginning of the year.
Visa believes consumers will adopt its A2A solution to pay bills such as rent and utilities, and for subscriptions such as streaming services and gym memberships.
Mandy Lamb, managing director of Visa UK and Ireland, said the company aims to bring pay-by-bank methods “into the 21st century”.
“Visa A2A will ensure consumer-to-business bank transfer payments have similar levels of protection that consumers are used to when they use their cards,” she said.
“That’s why we are collaborating with UK banks and open banking players, bringing our technology and years of experience in the card market to create an open system for A2A payments.”
Visa A2A will be available to all eligible banks and other industry partners, and will introduce standards and rules to further modernise open banking-based payments.
It is being designed in partnership with UK fintechs Banked, Modulr, Moneyhub, Salt Edge, Vyne and Yaspa, and has been endorsed by major banks including Lloyds, Barclays, Nationwide and HSBC.
In a joint statement, each of the banks voiced their support for an industry-led solution as the best way to unlock the potential of A2A payments in the UK.
Variable recurring payments (VRPs) simplified
The fintechs that are helping to design Visa A2A pointed to its potential to accelerate the adoption of variable recurring payments (VRPs).
Whereas Direct Debits are processed using the BACS clearing system, which has a three-day settlement cycle, VRPs are processed and settled instantly using Faster Payments.
VRPs can also be processed at a lower cost than the 5p to 50p that BACS charges per transaction for Direct Debit (plus any additional fees charged by the customer’s bank).
In addition, Direct Debit can penalise merchants if a payment fails due to insufficient funds, with charges of up to £50 per failed payment.
Brad Goodall, CEO of Banked, said: “The customer benefits of using VRP include increased control and security of online payments, but the value for businesses is equally compelling.”
As covered by Vixio, the UK’s Payment Systems Regulator (PSR) expects to publish its latest draft proposals on the expansion of VRPs in October this year.
The proposals will look to expand the use of VRPs as part of the PSR’s Phase 1 rollout of the new payment method, which covers regulated financial services, utilities and government agencies.
According to the PSR, the key issues that it intends to address are coordination of payment initiation agreements, mandated participation and pricing.
