Key Points:
- Visa is launching a service for account-to-account (A2A) payments, bypassing the traditional direct debit process.
- The service allows users to monitor payments and resolve issues through their banking apps.
- It will launch in the U.K. in early 2025, with plans for expansion in the Nordics and Europe later that year.
Visa has announced plans to roll out a new dedicated service for bank transfers that skips credit cards and the traditional, often cumbersome, direct debit process.
The new service, slated to launch in the U.K. in early 2025, is part of Visa’s strategy to enhance account-to-account (A2A) payments across Europe. By removing the need for credit cards, Visa aims to simplify online purchases for users by letting them set up direct debits with just a few clicks on merchants’ e-commerce platforms.
This A2A service will allow users to monitor their payments more easily and resolve issues directly through their banking apps. Visa says this feature offers protection similar to that of card transactions, making it easier to deal with unauthorized transactions such as auto-renewals of subscriptions.
Initially, the service won’t apply to recurring payments for things like streaming services, gym memberships, or subscription boxes. However, Visa plans to expand its reach to these areas in the future.
The product, which will debut in the U.K. in early 2025, will later expand to the Nordic region and other European markets.
Addressing Direct Debit Challenges
Currently, setting up direct debit payments for bills and services requires consumers to fill out a form with personal details, which can feel insecure and offers limited control. Adjusting static direct debits can also be cumbersome, requiring advance notice to change the payment amount or the need to cancel and set up a new payment.
Visa’s A2A service aims to solve these issues by introducing variable recurring payments (VRP), a type of payment allowing users to make and manage recurring payments that fluctuate in amount. This gives consumers more flexibility and control over their finances.
“We want to bring pay-by-bank methods into the 21st century and give consumers choice, peace of mind, and a digital experience they know and love,” said Mandy Lamb, Visa’s managing director for the U.K. and Ireland, in a statement. “That’s why we are collaborating with U.K. banks and open banking players, bringing our technology and years of experience in the payments card market to create an open system for A2A payments to thrive.”
Visa’s A2A service leverages open banking technology, which allows third-party fintech companies to access consumer banking data, provided they have permission. Open banking has grown in popularity, especially in Europe, where regulatory reforms have made it easier to link bank accounts with fintech services for payment authorization.
In 2021, Visa acquired Tink, an open banking platform, for €1.8 billion ($2 billion), a move seen as a way for Visa to stay ahead of emerging fintech firms offering alternatives to traditional card payments. Tink’s technology will support Visa’s A2A initiative by enabling secure connections between bank accounts and payment systems.
Merchants have long criticized Visa and Mastercard for their card transaction fees, known as interchange fees, and for preventing them from offering customers cheaper payment alternatives. Earlier this year, Visa and Mastercard reached a $30 billion settlement to reduce these fees. Visa’s A2A service could be seen as a way to offer merchants more flexibility, though it could potentially cannibalize Visa’s own card business.
When asked about this risk, Visa told CNBC, “We are and always have been focused on enabling the best ways for people to pay and get paid, whether that’s through a card or non-card transaction.”