Visa has announced plans to introduce a new product aimed at enhancing the security and flexibility of account-to-account (A2A) payments, bypassing the traditional direct debit system, as reported by CNBC.
Set to debut in early 2025 in the U.K., with subsequent launches in the Nordic region and other parts of Europe, the service will allow users to make payments directly from their bank accounts with greater ease and control.
Visa’s New A2A Service
This new A2A service eliminates the need for consumers to rely on credit cards or the current direct debit process. Visa, one of the largest global card networks, revealed that users will be able to set up variable recurring payments (VRP) with just a few clicks, allowing them to manage payments of varying amounts directly through merchants’ e-commerce platforms.
A key feature of the service is its ability to let consumers monitor their payments and resolve issues via a banking app, offering similar protection levels to traditional card payments.
The A2A service is designed to address common issues with direct debit payments, such as unauthorized auto-renewals, by providing a mechanism to reverse unwanted transactions. While the initial launch won’t cover services like TV streaming subscriptions or gym memberships, Visa indicated that such offerings are planned for future updates.
Simplifing Direct Payments
Direct debit payments currently require consumers to submit personal and banking details, often with limited control over payment amounts. Visa’s A2A product aims to modernize this process by enabling more dynamic and secure payment methods using open banking technology. Open banking requires financial institutions to grant third-party fintechs access to consumer banking data, a trend that has gained traction across Europe due to regulatory changes.
Visa’s A2A system is built on the foundation of open banking, a technology it strengthened with the 2021 acquisition of Tink, a European open banking service, for €1.8 billion. This move followed Visa’s abandoned attempt to acquire Plaid, another open banking firm, positioning Visa to stay competitive in the rapidly evolving fintech space.
Merchants have long expressed frustration with the fees charged by Visa and Mastercard for credit and debit card transactions, known as interchange fees. In March, Visa and Mastercard reached a $30 billion settlement aimed at lowering these fees. By offering an alternative payment option that circumvents card transactions, Visa could potentially reduce its card-based revenue, though it has not yet disclosed how it plans to monetize its new A2A service.
Visa emphasized that its goal is to provide the best payment options, whether through cards or non-card transactions, and that it will continue to innovate in both areas.
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