Account-to-Account (A2A) payments are becoming highly popular among consumers in emerging markets. Take the proliferation of Pix in Brazil, or UPI in India; customers are realising the benefits of this digital payment. So how come the UK has been slower to adopt?
Speaking to Payment Expert, Richard Koch, Senior Policy Lead at Open Banking Ltd., believes that the UK’s mature payment industry has become one of the main barriers for A2A growth, while also citing the lack of a clear recognisable brand for Open Banking payments to build customer trust.
Koch spoke at length on why A2A payments like Pay by Bank present a “dual advantage” and why collaboration between merchants, regulators and customers is “not just important – it is fundamental”.
Payment Expert: One of the biggest takeaways from your panel at Pay360 was the business/consumer adoption debate around A2A payments. Can both grow at the same time, or would it need adoption from one side first before the other can follow suit?
Richard Koch: Adoption of A2A payments among businesses and consumers must grow in tandem. Unlike traditional network-based payment systems, A2A payments require retailers to offer the option before consumers can begin to use it at scale. The UK banking sector is already well-positioned for this transition, with around 90% market coverage expected under the new CVRP (Commercial Variable Recurring Payments) framework.
While finalising scheme rules and securing full participation remains a priority, there is strong momentum and clear appetite among banks, particularly given the government’s support.
On the consumer side, awareness is important but not a prerequisite for adoption. Historically, major payment innovations – such as chip-and-PIN and contactless – succeeded not due to large-scale education campaigns, but because they were intuitive and well-integrated at the point-of-sale. The same principle applies to Open Banking payments – if they offer a seamless, user-friendly experience, adoption will naturally follow.
PE: Do you believe banks/fintechs/regulators need to collaborate more on payment solutions like Variable Recurring Payments (VRPs) and if so, why?
RK: Collaboration is not just important – it is fundamental. VRPs and similar innovations function as network-based solutions that require industry-wide participation. Regulators play a crucial role in facilitating this process, particularly in resolving competitive tensions and ensuring fair pricing structures.
As Open Banking shifts from a regulatory-driven framework to a commercially-led model, the industry must embrace a more constructive, cooperative approach. CVRP is a test case for this, demonstrating how the financial sector can self-organise and innovate, while maintaining consumer protections and competition.
PE: In a similar vein, what more can be done to enhance the SEPA Instant payment rail amongst banks who are still unsure of its capabilities?
RK: The UK is taking a different approach to adoption compared to Europe. While the EU has opted for a mandated rollout of SEPA Instant, the UK is prioritising a voluntary, industry-led framework under regulatory guidance. This method fosters deeper engagement, ensuring that stakeholders have a vested interest in making the system work effectively. Our approach with CVRP mirrors this philosophy, encouraging collaboration rather than imposing a top-down directive.
Ultimately, the success of any new payment system hinges on demonstrating clear value to participants. By fostering cooperation and proving the benefits – both operational and commercial – banks will see SEPA Instant as an opportunity rather than an obligation.
PE: Whilst Pay by Bank is growing in adoption over recent years, how can this payment method help transform how merchants not only appease consumers at the checkout, but also retain brand loyalty?
RK: Pay by Bank presents a dual advantage: potential for lower transaction costs for merchants and the opportunity of a smoother, frictionless payment experience for consumers.
Traditional card payments often involve cumbersome authentication steps, such as one-time passwords, which can disrupt the customer journey. Open Banking, when implemented effectively, removes much of this friction, making payments faster and more intuitive.
From a merchant perspective, cost savings are significant, but the real opportunity lies in customer retention. A seamless payment experience builds loyalty, and merchants can integrate Pay by Bank into loyalty schemes to further incentivise repeat usage.
Some SMEs are already exclusively using Open Banking payments due to their efficiency and customer preference. Larger organisations, such as HMRC, have also benefited, streamlining tax payments while reducing administrative burdens.
PE: How far away is the UK from having an instant payment rail like Pix in Brazil? What boundaries are in place and how much cross-industry collaboration is needed for a task this big?
RK: The UK is still in the early stages of this journey. However, comparing the UK to Brazil is not entirely fair.
Markets like Brazil had minimal card payment infrastructure and were able to leapfrog directly into digital payments. In contrast, the UK has a highly mature, card-centric market, similar to the US, Canada, and Australia. Shifting away from an entrenched system requires overcoming significant inertia.
That said, international examples prove that when consumers experience the benefits of instant payments, adoption follows. The challenge in the UK is not consumer willingness, but rather integrating new payment methods into an already well-established system. Achieving this transition requires cross-industry collaboration and a focus on delivering clear advantages over existing options.
A well-branded, user-friendly Open Banking experience will drive natural adoption without the need for restrictive approaches.
PE: Should payment providers do more to educate merchants and consumers about payment methods they have never heard of before, such as Pay by Bank or other instant A2A payments?
RK: Yes, but traditional consumer education campaigns may not be the best approach. Instead, building trust and familiarity is key.
One of the main barriers to adoption is the lack of a clear, recognisable brand for Open Banking payments. Visa and Mastercard have spent decades building consumer trust in card payments – Open Banking currently lacks that level of brand cohesion.
Industry-wide efforts are needed to establish a unified, recognisable proposition that helps consumers understand their protections and what to expect. Just as early contactless payments initially suffered from inconsistent branding before converging into a well-understood experience, A2A payments require a clear and consistent identity.
PE: How crucial is it that payment providers and merchants do not overbear the consumer with new instant, A2A methods at the risk of no adoption at all?
RK: Consumers appreciate choice. Experience shows that when people try Open Banking payments and find them seamless, they continue using them.
Retailers already provide a wide array of payment methods, particularly in sectors like gambling, where virtually every conceivable option is available. The key is not to limit choices but to ensure clarity in how these choices are presented.
A well-branded, user-friendly Open Banking experience will drive natural adoption without the need for restrictive approaches.
