Visa, Mastercard, Dwolla and Walmart launch pay-by-bank projects | PaymentsSource

Making payments directly between bank accounts is not a new idea — it’s not even novel. But a convergence of factors are making what’s called pay-by-bank one of the hottest trends in the payments industry.

Also called account-to-account payments, several large projects were either announced or got underway in the past few weeks.

“There are a number of contributing key factors to the growth of pay-by-bank, including open banking and real-time payments adoption, and a lower-cost alternative to card payments,” said Elisa Tavilla, director of debit payments at Javelin Strategy & Research.

A2A transactions make up a small but expanding share of payments. In the United States, A2A e-commerce payments totaled $1.2 trillion in 2017, $2.7 trillion in 2022 and are on pace to reach $4.5 trillion by 2027, according to McKinsey, noting the percentage of A2A was expanding from less than 3% to 5% in that time, while the percentage of card payments is falling from 94% to 90%.

Walmart, Dwolla and the card brands have all scheduled new A2A features that are set to go live in early 2025. This accelerates what had already been a trend toward supporting A2A transactions as payment firms look to attract merchants and consumers eager to avoid card fees during a period of high prices.

The initiatives come as the Consumer Financial Protection Bureau adds payment apps to its open banking rule, also called Section 1033, a key move that can make it easier for fintechs to offer A2A payments.

 While payment experts say the new rule lacks optimum clarity for payment fintechs, the updated 1033 does provide a government endorsement to firms that use open banking to compete with traditional payment methods.

“This will likely further increase growth in open banking and pay-by-bank in the U.S.,” Tavilla said.

Here are several major A2A initiatives that just got launched or dramatically expanded since the end of August.