The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

While 85 per cent of UK consumers use instant A2A rails for making payments, this is largely limited to peer-to-peer transactions. Furthermore, there are clear advantages to making A2A payments: merchants get faster access to funds and save on fees (interchange, card scheme, and chargeback), and as a result, consumers are expected to benefit from lower prices.

Why haven’t A2A payments gained traction for UK consumer purchases?

There are multiple reasons affecting all participants in the payments ecosystem - consumers, merchants, banks, PSPs, card schemes – that together create barriers to adoption: 

• Consumers see no reason to switch and lack trust

Our survey of consumers shows that they are happy paying with cards and digital wallets, see no reason to change their habits without a compelling reason, and have concerns over sharing banking details outside of banking websites and apps.

• Absence of a commercial model that is suited for Banks, Acquirers and Card schemes 

The transition to A2A for C2B payments requires a commercial model that offsets impact to an important revenue stream: interchange fees for banks, scheme fees for card schemes, and acquiring mark-up for acquirers.

• Merchants don’t have a compelling advantage 

Merchants typically seek to optimize for conversion and then cost. Without a sufficient mass of consumers, the loss of conversion from actively promoting A2A is a much bigger worry.

Key levers to encourage A2A instant payments adoption

Generating network effects is critical for growing C2B A2A payments. On the one hand, the requisite commercialization models need to be in place for PSPs, acquirers, card schemes, merchants, and banks. On the other, consumer adoption needs to be encouraged. In this article, we focus on what can get consumers to use A2A instant payments regularly: 

1. Consumer education: Consumers need to be made aware of A2A payment options, how they work, safeguards, and importantly the benefits to overcome low levels of awareness  (36 percent).
2. Building trust: Using institutions (e.g., banks, trusted brands) prominently in the payment workflow and in secure environments provides people assurance that this way to pay is indeed secure.
3. Social proof: Positive recommendations and testimonials serve as a powerful tool to encourage adoption.
4. Preferred and free option at checkout: For businesses where cost considerations are significant and conversion considerations low (e.g., utility payments, funding of investment/trading accounts), a combination of setting A2A payment as default (or marked as preferred) and charging for non-A2A in a PSD2 compliant manner can go a long way in getting consumers to become familiar with using A2A payments.
5. Enhanced consumer experience: Creating an extremely intuitive and streamlined workflow, in addition to layering services such as “split payment” and “transfer using phone number”, can drive continued usage.
6. Financial incentives: Financial incentives, such as discounts, rewards, and exclusive offers, can help attract consumer attention and create stickiness.