Account-to-Account Payments & PSD2: Driving a New Era of Seamless Payment Solutions

 

TL;DR

• Account-to-account (A2A) payments move money directly between bank accounts, bypassing card networks and the interchange fees that come with them, enabled at scale by PSD2's open banking framework.
• A2A payment volume in Europe reached €7.4 trillion in 2025 and is growing at 13% year-on-year, driven by PSD2 compliance, rising merchant demand for lower processing costs, and consumer comfort with bank-authentication flows.
• For merchants, A2A removes interchange fees (typically 0.3%-1.8% on card transactions) and reduces the chargeback risk that defines so much of high-risk payment processing.
• For payment providers and payment gateway providers, A2A is both a threat and an opportunity, it removes card rails from the equation but opens a new layer of payment initiation infrastructure to build on.
• In 2026, PSD2's successor framework PSD3 is in the consultation phase across EU member states, with tighter SCA rules and expanded open banking rights expected to accelerate A2A adoption further.

What Account-to-Account Payments Actually Are

Most online transactions today follow a familiar path: the customer enters card details, the payment gateway encrypts and routes that data through a card network (Visa or Mastercard), and funds move from the issuing bank to the acquiring bank over two or three business days. Card networks charge for that routing. Issuing banks charge for providing the card. The merchant ends up absorbing 1.5%-2.5% of every sale before a penny reaches their account.

Account-to-account payments cut that path in half. Instead of routing through a card network, the payment goes directly from the customer's bank account to the merchant's bank account, authenticated by the customer's own bank, initiated through an open banking API. There are no card credentials to steal, no network to route through, and no interchange to pay.

This has always been technically possible through bank transfers. What PSD2 changed is who can initiate those transfers, and how seamlessly that initiation can be embedded into a checkout experience.

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What PSD2 Did - And Why It Changed Everything

The EU's Second Payment Services Directive (PSD2), which came into full enforcement in 2019, did something radical: it legally required banks to open their customer account infrastructure to licensed third parties. Under PSD2, a regulated Payment Initiation Service Provider (PISP) can, with the customer's consent and authenticated via Strong Customer Authentication, initiate a bank transfer directly from the customer's account on their behalf.

Before PSD2, initiating a bank transfer from someone else's account required being a bank yourself. After PSD2, any regulated fintech, payment gateway provider, or payment processing platform with a PISP licence can do it through a standardised API. This is the legal and technical foundation that made scalable A2A checkout possible.

For consumers, the flow looks like this: they reach checkout, select "pay by bank," authenticate with their banking app (usually a biometric or PIN), and the payment is done. There's no card number to type, no OTP to forward, no redirect to a separate provider. For merchants, the money arrives directly into their account, typically same-day or near-real-time via Faster Payments in the UK or SEPA Instant in the EU.

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The Numbers That Are Making Merchants Pay Attention

The economic case for A2A over card-based payment processing is straightforward, and in 2026 it's moving from theoretical to structural.

A merchant processing €1 million per month on card payments at a blended 1.5% interchange-plus rate pays approximately €15,000 per month in card network and issuing bank fees alone, before the payment gateway provider's own markup. The same volume processed via A2A eliminates that layer entirely, A2A providers typically charge a flat fee per transaction (often €0.10-€0.30) or a very low percentage (0.1%-0.3%), with no interchange component.

At scale, the difference is not marginal. For a mid-sized ecommerce merchant doing €5 million per month, switching payment processing for even half of eligible transactions to A2A could recover €30,000-€50,000 per month in processing cost, enough to fund a meaningful proportion of customer acquisition spend.

The chargeback picture is similarly compelling. Card chargebacks, a defining cost and compliance burden for any merchant, and especially for high-risk payment processing verticals, don't exist in the same form for A2A payments. A bank transfer authenticated by the customer through their own banking app is irrevocable. There's no dispute mechanism equivalent to a card chargeback because the customer directly authorised the payment. For high-risk merchants who spend significant resources managing chargeback ratios against Visa VAMP and Mastercard CE3.0 thresholds, this alone changes the cost calculus.

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What It Means for Payment Gateway Providers

The rise of A2A sits uncomfortably for traditional card-centric payment gateway providers, because it removes the underlying infrastructure their model is built on. If customers are paying directly from their bank accounts through open banking APIs, the gateway's role as an intermediary between card networks and acquiring banks becomes structurally less relevant.

But the reality is more nuanced. Payment gateway providers who have moved quickly to integrate A2A capability have found it adds a meaningful conversion and cost tool to their existing stack rather than replacing it. The most sophisticated payment processing platforms in 2026 support both card and A2A payment methods from a single integration, routing each transaction through whichever rail makes most economic and user experience sense, card for international buyers or wallet users, A2A for domestic buyers in markets with strong open banking adoption.

The payment providers that are best positioned in this environment are those who hold PISP licences directly or partner with licensed PISPs to offer A2A initiation natively, rather than bolting it on as an afterthought. The difference shows up in authentication flow quality, a natively integrated A2A checkout that opens the customer's banking app directly converts meaningfully better than a redirect-heavy flow where the open banking handoff is visibly clunky.

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Where A2A Works Best - And Where It Still Has Limits

A2A payment processing is not universally applicable, and understanding where it thrives versus where it underperforms shapes how merchants should think about integrating it.

A2A works exceptionally well for:

• High-value domestic transactions where interchange savings are largest in absolute terms and the buyer is comfortable with bank authentication
• Subscription and recurring billing, where the customer can pre-authorise a Variable Recurring Payment (VRP) - a PSD2-enabled consent mechanism that allows A2A debits on a schedule without requiring re-authentication for each payment
• Business-to-business payments, where bank transfer is already the cultural norm and the added checkout friction of bank authentication is expected rather than surprising
• Regulated industries like iGaming and forex, where eliminating chargebacks removes a significant compliance and cost burden and where the irrevocable nature of bank transfers benefits operators

A2A still faces real friction in:

• Cross-border payment processing outside the EU and UK, where open banking standards are less mature and bank API coverage is fragmented, paying a merchant in Brazil or Indonesia via A2A involves navigating entirely different regulatory frameworks from PSD2
• Impulse and low-value purchases, where the authentication step, however brief, adds more friction than scanning a saved card with a payment wallet
• Markets where payment wallet adoption is very high, since Apple Pay and Google Pay already deliver a comparable one-tap experience on top of card rails, reducing the friction advantage that makes A2A compelling

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PSD3 on the Horizon: What's Coming Next

PSD2 created the legal foundation for A2A payments. PSD3, currently under consultation with EU member states in 2026, with implementation expected by 2027-2028, is designed to address the gaps that slowed PSD2 adoption in practice.

The three most significant PSD3 proposals for A2A payment processing are cleaner API standards (PSD2 allowed banks to implement open banking APIs inconsistently, creating compatibility problems for payment providers trying to connect across multiple banks), expanded VRP rights that would bring variable recurring payments to more use cases beyond the current pilot scope, and stronger liability rules that give consumers clearer recourse when A2A payments go wrong, addressing one of the key consumer trust barriers holding back adoption beyond the early-adopter segment.

For payment gateway providers and payment processing platforms, PSD3 represents an infrastructure investment signal: the open banking rails underpinning A2A are going to get more reliable, more standardised, and more broadly adopted. Building A2A capability into core payment infrastructure now positions providers ahead of what will likely be a significant adoption curve once PSD3 removes the current friction points at the bank API layer.

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What Merchants Should Do in 2026

The case for exploring A2A isn't that it should replace card payment processing, it shouldn't, and for most merchants it won't anytime soon. The case is that it's now mature enough in EU and UK markets to serve as a genuine second rail that saves cost on the transactions where it works well.

A few practical steps for merchants evaluating A2A:

• Ask your current payment gateway whether they support A2A initiation natively or through a PISP partner, and specifically whether VRP is available for eligible use cases.
• Run an analysis of your transaction mix. High-average-ticket domestic EU and UK transactions are the fastest payback segment. Calculate what you'd save on interchange at current volumes before committing to an integration.
• For high-risk merchants, talk to your high-risk payment gateway provider specifically about A2A as a chargeback reduction strategy. The irrevocability of bank-authenticated payments is a direct response to the chargeback problem that drives most high-risk processing costs.
• Don't integrate A2A as a replacement for card checkout, integrate it as an additional option alongside your existing payment methods and let conversion data tell you where customers prefer it.

The trajectory here is clear. PSD2 opened the door. PSD3 will widen it. And the merchants and payment providers who understand what account-to-account payments actually change, not just in theory but in the fee economics of every transaction, are the ones who will move first and benefit most.

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Frequently Asked Questions

What is an account-to-account payment?
An A2A payment moves funds directly from a customer's bank account to a merchant's bank account, bypassing card networks and the interchange fees they charge. It's authenticated through the customer's own bank using open banking APIs enabled by PSD2.

What is PSD2 and how does it enable A2A payments?
PSD2 (Second Payment Services Directive) is EU regulation that requires banks to open their customer account infrastructure to licensed third-party providers. This allows Payment Initiation Service Providers (PISPs) to initiate bank transfers on behalf of customers at checkout, which is the technical foundation of A2A payment processing.

Do A2A payments have chargebacks?
No - A2A payments are irrevocable bank transfers authenticated directly by the customer. There is no card-network chargeback mechanism. For merchants in high-risk payment processing verticals, this significantly reduces dispute risk and compliance overhead under programs like Visa VAMP and Mastercard CE3.0.

Does my payment gateway support A2A payments?
Some payment gateway providers have integrated A2A initiation natively; others haven't. Ask your provider specifically whether they hold a PISP licence or partner with one, and whether Variable Recurring Payments (VRP) are available for subscription billing use cases.

Is A2A cheaper than card payment processing?
In most cases, yes, significantly so. Card payment processing includes interchange (0.3%-1.8%), network assessment fees, and the gateway provider's markup. A2A typically charges a flat per-transaction fee of €0.10-€0.30 or a very low percentage with no interchange component, making it materially cheaper for high-value and high-volume merchants.

What is PSD3 and when will it take effect?
PSD3 is the proposed successor to PSD2, currently under consultation in 2026 with implementation expected 2027-2028. It aims to standardise open banking APIs across EU member states, expand Variable Recurring Payment rights, and strengthen consumer liability protections, all of which will further accelerate A2A adoption.