WHERE OPEN BANKING GOES NEXT

FEATURE

Look around. Most likely, every object you can see has at least one payment attached to it. But most people never give payments a second thought. Payments just happen.

The reality is that behind the scenes there is a complex web of different systems and infrastructure providers, known as “rails,” that operate in concert to move your money into the vendor’s account. Account-to-account (A2A) payments, also known as “pay by bank,” allow people to pay merchants directly at a lower cost to the merchant.

The name may be confusing because every payment goes ultimately from one account to another. But A2A refers to doing that via national clearing systems. While it has long been possible to send money between bank accounts via an online transfer, this hasn’t been a standard way to pay. Open banking A2A payments make the process quicker and less manual, by mandating the automatic sharing of the necessary information to initiate a payment.

There are other benefits as well. Since it’s facilitated by banks, A2A enjoys bank-grade security, such as strong customer authentication. And as countries adopt real-time payment systems, A2A also becomes a notably fast way to transact. “This is why open banking adoption will be very significant in the U.S.,” says Vaccino. “Payment schemes were super slow for many years. But you now have real-time payment rails such as ACH, RTP and FedNow, and we are seeing banks adopting them.”

Open banking payments are growing. Simone Martinelli, CEO of open banking payments company Volume, says A2A adoption in the UK was “extremely low” in the first five years of open banking, but that is now rapidly changing. “Since the start of 2023, we’ve seen growth above 20 percent month-on-month, reaching a peak of 40 percent. So it is skyrocketing,” he says. In absolute terms, however, they are still relatively small fry for consumer purchases. Globally, just seven percent of e-commerce transactions happen via A2A.¹² Yet proponents are bullish. “I think we will move to instant, easy payments over national infrastructure,” says Todd Clyde, the CEO of open banking payments fintech Token.io.

One aspect is elevating the user experience. Some companies are exploring how QR codes, for instance, could bring A2A to physical point-of-sale. Others are addressing the online A2A experience. Volume, for example, provides a “one-click” button for online merchants to integrate into their checkouts with minimal setup. This connects to users’ banking apps, allowing them to initiate a payment with just one action rather than moving between multiple screens and apps. Others still are convinced that integrating open banking with digital wallets is the key, noting that countries with large numbers of A2A transactions are ones where those payments happen not via open banking protocols, but through digital wallet-based schemes.¹³

Another crucial aspect is security. Of particular importance is how dispute resolution mechanisms work under A2A payments. Credit cards hold a strong reputation for security and consumer protections against unauthorized payments fraud, with part of their costs going directly to fraud prevention and making customers whole, even if the money is not recovered from a merchant or scammer. By definition, no cards are involved in an A2A payment, meaning those safeguards don’t exist. An argument could be made that the reduction of friction—and the interconnected nature of open banking through a web of third parties—in fact presents new opportunities for cybercrime, as fraud prevention is more challenging in a real-time context.

Ian Morrin, Head of Payments at open banking platform Tink, says that this is an area where progress is being made. “When it comes to improving protections, there is strong industry momentum at the moment,” he says, noting that in June 2025, the next stage of Visa A2A was announced.¹⁴ “That’s bringing an enhanced framework to Pay by Bank, and Tink is excited to be one of the first members of this new solution. Visa A2A connects banks and third-party providers under a common rulebook, which will increase buy-in and boost consumer trust in Pay by Bank. UK consumers and businesses using Pay by Bank will benefit from a similar level of protection typically associated with card payments.”

The jury’s out on how long A2A could take to go mainstream in consumer payments, and what it means for the payments landscape of the future. Clyde predicts, simply: “There is a cheaper, simpler way to move money.”

Lending has one universal truth: Giving out the money is easy, but getting it back is difficult. The greater the uncertainty, the higher the interest rate to compensate for the risk. Traditionally, lenders have used credit bureaus to score this risk as well as to cut out “bad” borrowers.

Misha Esipov, CEO of credit analytics company Nova Credit, says the existing credit bureau system does not fairly serve a large share of the global population. He estimates more than 100 million Americans alone are “misunderstood” by the credit bureaus, and shut out from access unnecessarily. This includes the credit-invisible segment—those with a “thin file” or no file at all—who are often recent immigrants to a country, young adults, students, or people later in life. Often this segment has real assets, but hasn’t been consistently borrowing to be able to show they can afford financing to buy, say, a car.

This is an area where open banking can help. One of the most compelling use cases is in promoting financial inclusion, in particular by bringing credit products to users currently excluded from them.

“It involves using deposit data and transaction-level data to create a more complete picture of someone’s financial health,” says Esipov. “Some people have also made mistakes through missing a payment here or there, which tanks their conventional credit score, but their underlying financial health is great. They generate consistent income, they’re saving, they never reach overdraft.”

Transaction data—as opposed to a credit score—can allow lenders to more accurately see whether someone can afford a loan, by modeling and forecasting cash flows in real time. This lets lenders serve a wider range of customer segments while also protecting their own balance sheets. The opportunity is greatest in places such as India and Brazil because credit bureau coverage is only as good as consumer credit penetration. Approximately 119 million Indians monitor their credit out of a population of 1.4 billion.^15,16

Lending based on transaction data is itself not new. But in the past this was only an option if you were borrowing from the bank that looked after your money. This new approach changes the status quo, but also, in turn, has the potential to improve the picture for traditional lenders. In the UK, open banking-based lender Salad, for instance, helps borrowers enter the established financial system. “We re-report data back into the credit reference agencies, so we can help borrowers build their credit score,” says Alex Marsh, Chair of Salad.

So, how will this play out in the longer term? Esipov thinks there’s no reason why the open banking approach couldn’t become the norm. “You could see a world where the whole credit bureau system gets replaced with open banking. If you were to rebuild the whole system now, you would rebuild it using open banking,” he says. “Because all the information about who you are and how you earn, and your financial health, is captured in your bank account.”

If this happens, he says, it would be transformative for so many. “Access to capital accelerates time. You can use your potential from the future to give you the ability to move faster in the present. The availability of funds and capital, and credit access, can accelerate economic mobility and a whole host of other things. That’s why the mission behind credit access is so important.”