The future of account-to-account (a2a) payments in the US

Account-to-account (A2A) payments have been around for centuries in the form of checks. When you write a check to a friend, for example, the money is transferred directly from your account to theirs. 

However, new forms of A2A payments have transformed the way consumers send money to friends and family—and transfer money between their own accounts. 

In this article, we’ll define exactly what an A2A payment is, explore how it has evolved alongside fintech, and examine what the future holds for it, particularly in the consumer-to-business (C2B) space.  

What is an A2A payment, and how does it work?

Account-to-account (A2A) payments are made directly between two bank accounts without an intermediary like a credit card company or third-party financial institution. They are typically only used by consumers and are either ‘me-to-me’, ‘me-to-you’, or ‘you-to-me’. A2A payments are most commonly used in P2P payment platforms like Venmo, CashApp, and Zelle.

Popular payment rails for A2A payments

The most popular A2A payment rails (the means by which payments are sent) are the Automated Clearing House (ACH) and paper checks. Checks are the ‘original’ A2A payment, and ACH is the next evolution, i.e., the digitized check. 

Many adults remember getting checks in an envelope from their relatives on birthdays and holidays. The younger generation gets Venmo or PayPal transfers instead. 

Both ACH and checks are low-cost options, but they can take hours or days to settle. ' Real-time' payments represent the next evolution of A2A payment rails. 

Real-time payment rails include The Clearing House’s Real-Time Payments (RTP) network, which can instantly send payments but for a higher fee than ACH. The Federal Reserve also launched a real-time rail called FedNow in July 2023. 

Consumers come into contact with RTP when they are given the option to transfer their money from an app like Venmo or PayPal. We typically see the free option (ACH), which takes 1-2 business days, or the option to get the money instantly for a percentage fee through RTP. 

For decades, the value of check payments far outnumbered the value of ACH transactions. However, since the rise of digital payment systems, direct deposit payroll, and P2P payment apps, ACH value has greatly surpassed checks. 

The total value of bank payments (check and ACH) dwarfs other non-cash payment types such as credit and debit cards (see below). 

Why A2A payments are crucial for the future of fintech

A2A payments have been central to the evolution of the fintech industry, primarily through ACH. 

The fintech ecosystem is built on the ability to connect apps and bank accounts for transferring funds. Investment apps like Robinhood, P2P payment apps like Venmo, and crypto trading apps like Coinbase all heavily rely on the availability of easy and low-cost A2A payments. 

When a new customer signs up for a fintech app, they now expect to be able to fund their new account directly from their bank account instantly. In the past, connecting accounts for A2A payments was done with voided checks or confirming account numbers through microdeposits. Thanks to advancements in tools like Plaid Auth and Pay by Bank, account verification can now take as little as seven seconds. 

This instant connection has been central to the evolution of fintech, not just for payments, but for providing the secure account data needed for personal financial management, wealth management, and more. Beyond enabling fast onboarding, A2A payments offer several key advantages that continue to drive fintech innovation:

• Lower costs for startups and platforms: By bypassing expensive card network fees, fintech companies can scale payment operations more cost-effectively.

• Faster settlement speeds: Emerging real-time payment rails like RTP and FedNow reduce the cash flow friction that startups and digital platforms traditionally face.

• Stronger security and fraud protection: A2A transactions rely on direct bank authentication, strong customer verification, and reduce exposure to card-related fraud.

• Improved customer experience: Fast, simple bank connections improve signup conversion rates and reduce onboarding drop-off, which is critical for customer acquisition.

• New financial product opportunities: A2A connections make it possible to offer products like early wage access, instant funding for brokerage accounts, and real-time crypto purchases.

By solving major pain points like cost, speed, security, and accessibility, A2A payments have become the foundation for modern financial innovation. 

→ With Plaid Transfer, companies can use Plaid not just for instant account verification, but for also processing payments—either through ACH or real-time payment rails. 

Opportunities in account-to-account and bank payments

With the advances in instant account authentication, ACH wasn’t difficult to digitize. Digitally native processes and apps for transferring funds between accounts led to ACH's dominance of account-to-account payments in the consumer-to-consumer (C2C) space. However, most of the challenges—and opportunities—lie with consumer-to-business (C2B) payments. 

In the US, merchants heavily rely on card networks like Visa and Mastercard to collect payments from consumers, but it is costing them. In fact, a $100 purchase on a credit card costs a merchant around $3, compared to around $0.50 with ACH. If they were to deploy ACH at scale, the $2.50 savings per $100 transaction would create tremendous savings over time for businesses of any size. 

Imagine a large enterprise generating the savings that ACH payment offers across billions of transactions. For companies like Walmart, Amazon, and Starbucks, this would amount to hundreds of millions—if not billions—of dollars saved.

Yet merchants tolerate this fee because of three things: security, speed, and consumer familiarity. Card networks settle instantly, putting the money in the merchant’s account right away. With ACH, the transfer can take hours or days. This means that even if the consumer has funds in their account at the time they authorize payment, there may not be a sufficient balance in the account at the time the transaction settles, creating the possibility of an ACH return. When an ACH payment is returned, the merchant does not receive the funds, so they would need to look for other ways to collect payment from the consumer. 

Also, consumers are used to taking out their cards when it’s time to pay. If consumers had a reason to want to pay by bank (such as a loyalty program with rewards), this could change their preferences. Buy now, pay later apps like Klarna and Afterpay have emerged as an alternative that consumers are used to seeing in online checkout flows, but pay by bank is growing in popularity. It's already quite common in Europe. 

Bank payments for C2B offer the opportunity to solve these security, speed, and consumer demand issues. This could make C2B payments more like A2A payments that consumers use to pay each other (e.g., through Venmo). 

One way of solving this is with real-time payments (RTP), which settle instantly and aren’t subject to returns. However, the cost savings aren’t as significant as with ACH. To rely on ACH, merchants need both a low-friction way to enable payments (through e-commerce or point-of-sale) and tools that can help them reduce the likelihood of returns and fraud. 

If a merchant is offered fast settlement speed, certainty that settlement will happen, and a payment method consumers are interested in using, then bank payments become as ubiquitous as cards are today. This is where the big, disruptive opportunity lies in the bank payments space. 

→ Need to reduce the risk of ACH fraud and returns? Plaid Signal provides an instant risk assessment and enables you to customize payment flows based on the likelihood of an ACH return. 

Merchants with frequently repeating purchases lead the way

Businesses that regularly service customers for the same type of purchase provide a strong use case for setting up direct bank payments with their customers. Gas stations, in particular, have led the way in setting their customers up with bank payments. 

Many of us have seen these options at the pump, where a chain gas station has a sign asking customers to download an app and save $0.10 per gallon. The reason they’re willing to pass on that savings is that the app uses ACH for bank-linked transactions, which are significantly cheaper for them to process than credit cards. These apps not only reward customers for using ACH but also create other incentives such as reward points and exclusive discounts available only in the app. 

Examples of gas station apps that offer discounts and rewards for bank payments include:

• SmartPay Rewards offers $0.10 off per gallon and rewards points that can be redeemed for free items at the convenience store.

• Fuel Forward from 76 uses ACH through its Direct Pay tool for bank-linked payments. It offers $0.05 off per gallon and kickback points that can be used for rewards. 

The Chevron App allows users to make bank-linked payments through Venmo and PayPal and has its own rewards program.

Can account-to-account payments work for e-commerce?

While it hasn’t yet widely caught on, many entrepreneurs see an opportunity in adding the ability to pay by bank through mobile e-commerce apps. Bringing the same kind of customer experience that we see with the gas station apps above to e-commerce gives merchants a chance to save money on fees, offer exclusive discounts and rewards, and build stronger brand loyalty. 

One such entrepreneurial venture is Ansa, a fintech startup that has created a ‘wallet-as-a-service’ platform for merchants that handle a high volume of small transactions, which is where credit card fees hurt the most. Ansa enables merchants to create a closed-loop payments system using their own mobile app. 

Customers can upload funds to the app to use for in-app payments. Merchants can incentivize customers to use the app with rewards, incentives, and enhanced customer service options—similar to how the gas station apps get repeat customers to sign up. 

Looking for a better pay-by-bank experience? Plaid Pay By Bank offers a smoother user experience and lower transaction fees. 

Frequently asked questions about A2A 

What does A2A mean in payments?

A2A stands for "account-to-account." It refers to money transfers made directly between two bank accounts without an intermediary like a card network or third-party payment provider.

How are A2A payments different from card payments?

A2A payments move money directly between bank accounts, while card payments use credit or debit card networks as intermediaries. A2A payments often have lower fees, faster settlement times, and eliminate the risk of chargebacks for merchants.

Can A2A payments be used for shopping online?

Yes. Although less common today, A2A payments are starting to appear as an option in mobile apps and online checkout, especially when businesses offer discounts and rewards for paying directly from your bank account.

What are the benefits of A2A payments for businesses?

Businesses benefit from A2A payments through lower processing fees, faster access to funds (especially with real-time payment rails), and reduced fraud risks compared to traditional card payments.

The future: More A2A payment options and a multi-rail ecosystem

The first step in advancing A2A payments was evolving from paper checks, which has been largely achieved. The next was making A2A payments faster, which has also been achieved, but with a fee (at least for now). 

The future of account-to-account payments will be a multi-rail payment ecosystem with more consumer options—not just for transferring money between accounts but also for paying businesses and receiving payouts from them. Already, we see the option to transfer funds for free and wait 1-2 days or pay a small fee to get the funds now. We should expect to see more options like that outside of the ‘me-to-me’ use case. 

In the consumer-to-business (C2B) world, the options for bank-linked payments will sit alongside card payments. You can either sign up for the app and start getting discounts and earning rewards points, or continue to pay by card if you’re not into that. You may only want to sign up for the bank-linked payments app for your everyday merchants and not when you’re an infrequent shopper. 

Advancements in A2A payments are bringing more options, discounts, rewards, loyal customers, and lower fees. The payments industry is ripe for improvement, and the future looks interesting.