A2A Payments: The Disruption Banks Can’t Afford to Dodge in 2025

This Isn’t Just a Trend, It’s a Seismic Shift

As we move toward 2025, we’re witnessing a fundamental shift in payments, with analysts projecting a 30% surge in Europe’s A2A payment volumes this year.^[1] This isn’t just a trend, it’s a seismic shift, with 1 in 4 Europeans anticipated to embrace A2A payments for online transactions by the end of 2025, and 3 in 4 projected to use A2A payments by 2029, underscoring why banks cannot afford to ignore this opportunity.^[2]

Banks’ Double-Sided ‘Pay by bank’ Playbook

In 2025, financial institutions will begin to harness the full potential of open banking-based, real-time payments for both consumer-facing and merchant-facing use cases. This dual approach will not only streamline processes, but position forward-thinking banks at the forefront of the evolving payment landscape.

1. Banks will leverage open banking to transform how consumers interact with their accounts and products. Real-time deposits and insurance payments, and frictionless credit card and loan repayments will become the norm. This shift will enhance operational efficiency, reduce costs, and significantly improve customers’ experiences with applications in:

• Bank deposits: Seamless transfers between accounts, across different banks
• Bill payments: Streamlined processes for repaying credit card balances
• Loan repayments: Simplified, real-time loan servicing
• Streamlining insurance premium payments

2. Innovative banks will follow the lead of institutions like HSBC and HSBC Open Payments: a ‘Pay by bank’ solution for businesses. Offering an instant payment method that combines the speed of card payments with the simplicity of bank transfers, merchants and issuers leverage ‘Pay by bank’ capabilities through HSBC Open Payments to improve working capital for businesses and provide consumers with a secure, fast, and convenient payment option.

By embracing open banking-based payments for consumer-facing and merchant-facing use cases, financial institutions will unlock new revenue streams, deepen customer relationships, and gain a competitive edge in an increasingly competitive financial ecosystem. Those who fail to adapt will be left behind as consumers and businesses gravitate towards more innovative and user-centric payment services.

These Use Cases Could Explode ‘Pay by bank’

As banks leverage open banking to transform how consumers interact with their accounts and products, this will also ‘train’ consumers to use 'Pay by bank', increasing their familiarity and trust with this payment method.  Presented within the context of a consumers’ trusted mobile banking app or online banking platform, ‘Pay by bank’ use cases like bank deposits, bill payments and loan repayments could therefore become the catalysts for widespread consumer adoption of 'Pay by bank' in 2025, as Transport for London (TfL) did for contactless payments.

The Premium API Payoff

For third-party providers like Token.io, monetising open banking-based payments is straightforward: we implement a SaaS fee, minimums, and per-transaction charges. However, UK and European banks mandated to offer free access to open banking APIs have lacked clear commercial benefits. This is set to change in 2025.

In 2025, premium open banking APIs will begin to bridge this gap, motivating banks to develop new revenue-generating functionality that monetise their investments in PSD2. We predict a significant shift towards commercial Variable Recurring Payments (VRPs) in the UK and Dynamic Recurring Payments (DRPs) in Europe, as banks recognise the untapped potential of these and other premium API-driven services.

Early 2025 will bring long-awaited clarity on whether UK banks will be mandated to support premium API-based ‘Commercial Variable Recurring Payment’ (CVRP) functionality for payments within regulated industries (such as utility bill payments, government payments and charitable donations), for which CVRP replaces direct debit and card-on-file with bank account-on-file. By year-end, CVRP pilots for these use cases will be well underway.

In Europe, as financial institutions grasp the benefits of the SEPA Payment Account Access (SPAA) scheme (which are well outlined in a recent podcast episode by Open Banking Expo Unplugged), we'll begin to witness the emergence of innovative premium API-driven services. SPAA will allow banks to develop premium APIs that go beyond PSD2 functionality, including highly anticipated premium APIs for Dynamic Recurring Payments, which like VRP, can enable consumers to make frictionless one-click or recurring A2A payments.

Open, Instant, Inevitable

2025 will bring a significant shift in how financial institutions leverage open banking-based payments to enhance user experiences and unlock efficiencies and cost savings.

Make no mistake: 2025 will be a watershed year for A2A payments. Banks that embrace this shift can not only thrive but redefine their role in the global payments ecosystem. The future of payments is here, and it's open, instant, and unstoppable.