The current wave of changes impacting the payments landscape has led to increased adoption of pay by bank and instant payment solutions globally. While incredibly popular in consumer-facing industries across Europe, Asia, and the United Kingdom, these innovative payment methods are also revolutionizing business-to-business (B2B) transactions, offering options to bring unprecedented speed, security and efficiency to payments in the United States.
A2A’s Role in the Digital Payments Landscape
Account-to-account (A2A) transactions (also known as pay by bank payments) are digital transfers between bank accounts. These transactions use payment rails, such as the ACH Network, FedNow® Service and RTP® network, to conduct direct transfers from one bank account to another, bypassing traditional intermediaries such as credit card transactions and manual payments like paper checks.
These digital payment solutions represent a fundamental change in how businesses and consumers think about moving money. It's not just about convenience; it's about reimagining the entire payments ecosystem to be faster, more secure and cost-effective.
The Rise of Pay by Bank and Instant Payments
In recent years, nearly every industry has experienced a significant shift in consumer and business preferences towards faster, more convenient digital payment options. For these reasons, pay by bank payments are growing in popularity, providing businesses and their customers with more efficient, flexible and cost-effective payment solutions.
Understanding Consumer and Business Payment Habits
While cards are the preferred payment method among consumers for everyday transactions in the U.S., pay by bank is growing in popularity for larger, recurring transactions, including bill payments, subscription service fees, rent and utilities. In fact, a recent report from Visa found that 93% of U.S. consumers have made an A2A payment, and almost 70% have made a payment enabled by open banking.
Globally, consumers are expected to increase their instant payment transaction volume from 252 billion in 2024 to over 600 billion by 2028. The B2B sector has taken note, rapidly adopting these payment methods and their potential to streamline operations and improve cash flow. Projections anticipate that instant payments in the B2B space will reach 42% of all cross-border payments by 2028, at $16 trillion. This is an increase from 17% of cross-border payments accounting for $5 trillion in 2024.
What’s Driving Adoption for Businesses?
The appeal of pay by bank and instant payments lies in their abilities to address common pain points impacting B2B transactions. Working with larger volumes and values, traditional payment methods in B2B transactions (like file-based ACH and paper checks) often involve delays, high fees and complex reconciliation processes. In contrast, automated A2A payments offer near-instantaneous transfers, reduced costs and simplified tracking and reporting.
Moreover, the rise of these payment methods aligns with broader trends in digital transformation. As businesses increasingly move their operations online, they're seeking payment solutions that match the speed and flexibility of their other digital processes. Pay by bank and instant payments fit seamlessly into this digital-first approach, enabling businesses to create more efficient, automated financial workflows. Instant payments provide businesses with 24/7/365 access to the FedNow® Service and RTP® network. This leads to enhanced payment transparency, seamless digital transactions and streamlined operations.
It's also worth noting that regulatory changes and technological advancements have played a crucial role in facilitating the growth of A2A payments. In many regions, open banking initiatives have made it easier for businesses to integrate direct bank transfers into their payment systems. Simultaneously, improvements in security protocols and fraud detection have helped build trust in these new payment methods, encouraging wider adoption across the B2B landscape.
Why Pay by Bank and Instant Payments are Ideal for B2B
A2A payments are ideal for B2B transactions, providing modern solutions required to transform how businesses manage their cash flow, process payments and interact with their partners, vendors and customers. Businesses can expect the following results from adopting pay by bank and instant payment methods:
Speed and Efficiency
Time is money. Instant payments allow for near-immediate settlement, dramatically reducing the time it takes for funds to become available. Speed is particularly crucial for B2B transactions, where delayed payments can disrupt supply chains and impact operations.
Cost-Effectiveness
Traditional payment methods often come with hefty fees, especially for large volume or international transactions. Pay by bank solutions typically offer lower transaction costs, making them an attractive option for businesses looking to optimize their payment processes.
Enhanced Security
With fraud and other instances of digital threats on the rise, businesses are prioritizing payment security more than ever. Pay by bank and instant payment solutions typically leverage advanced encryption and tokenization methods to authenticate transaction details, providing secure payment options for high-value B2B transactions.
Credit card payments and paper checks have higher rates of fraud than A2A payments. Increased visibility, instant payment processing and authentication reduce fraudulent transaction incidents to protect businesses from financial losses.
Improved Cash Flow Management
The real-time nature of these payment methods allows businesses to have a more accurate, up-to-date view of their financial position. This visibility is invaluable for effective cash flow management and financial planning.
Seamless Integration
Modern payment APIs are designed with integration in mind. They can easily connect with existing accounting and ERP systems, streamlining financial operations and reducing manual work.
Better Customer Experiences
With 75% of consumers citing security and trust as the number one influence when selecting a payment type, businesses can expect increased customer satisfaction by providing faster, more secure payment methods with pay by bank and instant payments.
The Dwolla Advantage
At Dwolla, we're committed to making A2A payments as accessible and user-friendly as possible for businesses. With over 500 customers, our platform facilitates over 120 million payments annually, a testament to the growing demand for efficient payment solutions. We understand that adopting new payment methods can seem daunting, so we've focused on creating a seamless onboarding experience. As a leading payment service provider, Dwolla offers a comprehensive solution through our Open Banking Services. We've simplified the A2A payment experience by also providing instant account verification and real-time balance checks—all through a single API. This approach makes us the one-stop shop for A2A payments, addressing the traditional challenges businesses face when navigating multiple vendors, APIs and technical integrations.
Our unified integration enables businesses to create rich, embedded payments experiences within their applications. With access to open banking-powered payments, businesses can verify customer and business records, securely exchange account credentials and check account balances in real-time before initiating payments. This comprehensive solution streamlines operational and technical integration and simplifies ongoing maintenance of payment solutions.
Dwolla's scalable payments platform covers over 95% of consumer accounts in the United States, connecting to more than 13,000 banks with 700+ OAuth connections. This extensive coverage provides direct, secure and uninterrupted access to financial institutions, making our solution ideal for businesses looking to implement or expand their A2A and instant payment capabilities.
Looking Ahead
The future of B2B payments is undoubtedly digital, instant and secure. At Dwolla, we're excited to be at the forefront of this payment revolution. By providing modern, flexible and reliable A2A solutions, we're empowering businesses to transform their payment processes and stay ahead of the competition in an increasingly digital economy.
As businesses continue to prioritize speed, security and efficiency in their financial operations, these payment methods will play an increasingly crucial role. The shift towards pay by bank and instant payments isn't just a trend—it's the future of B2B financial transactions.
Are you ready to enhance your payments platform? Schedule a call with a payments expert today.