The news that A2A payments provider Venmo has been added by Amazon as a payment method feels like a watershed moment.
For years, industry chat has talked about the potential for payments that didn’t use cards or cash: charts, graphs and predictions all told us this was coming, but the announcement from the marketplace behemoth in November confirms it.
Founded in 2008, Venmo has sustained its stratospheric growth trajectory in recent years by enabling crypto trading, instant A2A payments (account-to-account) and a Mastercard credit product through its app.
The app also features social media messaging alongside payments, which makes Venmo the closest thing in Western markets to the kind of functionality enjoyed by WeChat and AliPay users.
A recent survey from Netfluential noted Venmo users shop two times more frequently than average – something which no doubt encouraged Amazon’s recent move.
Meanwhile, A2A payments have experienced breakthrough levels of growth in recent years across Europe, with players like Trustly and Zimpler consistently posting triple-digit growth numbers.
PSD2’s mandate that banks must permit third-party access to customer data and channels as part of Open Banking has made A2A an easier sell – and merchants will love the lower fees and faster settlement offered by A2A.
The United Kingdom understands that regulatory action will help boost A2A payments and and has undertaken two initiatives: the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) are creating a new regulatory body to oversee open banking and A2A payments.
The PSR and FCA are also proposing new regulations aimed at curbing fraud for introduction into parliament.
The EU is not far behind, promising regulatory action for real-time payments in the coming months.
The European Central Bank has also urged the European Payments Council to accelerate the updating of existing instant payments using the SEPA Instant Credit Transfer Scheme.
Meanwhile, in the United States, the Federal Reserve is considering regulations to govern FedNow, its own RTP scheme.
Buy-Now-Pay-Later (BNPL)’s meteoric rise has been well documented in these pages, as has the rapid albeit still marginal role of crypto in payments.
Our lead feature for this issue, “Trending in 23” (see page 10), points out that there’s more to come, with request to pay (R2P) and variable recurring payments yet to have a significant impact on the market.
However welcome the success of alt-pays may be, there’s no doubt they present a challenge for merchants who want to keep up with their customers’ favoured payment methods.
Perhaps the biggest challenge lies with acquirers, who can no longer afford to offer card payments alone.
A recent survey from Tribe Payments reveals more than 55 percent of European merchants want to expand the range of payment options they offer – including adding their own store cards and payment apps, accepting multi-currency payments, and more.
Acquirers are going to have to adapt quickly to this new, plural landscape – or risk irrelevance.
Taken together, these developments show how quickly the payments world is changing.
While cards still dominate – either in their physical form or through a digital wallet – it won’t be long before Open Banking makes direct payments between merchants and customers more common.
OBIE data in the UK suggests ten percent of Brits are already using Open Banking, for instance.
The growth of alt-pays also explains why the major card networks are expanding their offering across the payments value chain and snapping up FinTechs in a bid to change their business model for the future.
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