Card Networks Challenge FinTechs for Account-to-Account Payments Share

Earlier this year, PYMNTS Intelligence found that more than half of consumers were not aware of pay-by-bank options, or were hesitant to use them.

In an age where relationships with banks are nearly ubiquitous — the Federal Reserve noted last month that just about 96% of households have at least some form of checking or savings account with a bank or credit union — the move toward direct account-to-account (A2A) flows should be an intuitive one. But it hasn’t been, at least not yet, though the rise of open banking promises to change that.

Part of the issue can be traced to the speed of the transactions, where, as detailed here, a recent PYMNTS Intelligence report found 50% of consumers experience up to a week-long wait for payouts, starkly contrasting with 43% of consumers who prioritize real-time payments.

One Minute to Settlement

Last week Visa announced that Visa Direct — the company’s network that moves money between client financial institutions’ accounts linked to card credentials including debit — would make funds available within one minute (and thus in real time).

The announcement, where that functionality will be available starting in April of next year, underscores the fact that the payment networks — Visa and Mastercard — have been making strides to move their networks beyond cards, and facilitating payments, toward payouts (in use cases including government disbursements and earned wage access, among others) underpinned by globally-trusted infrastructure.

That infrastructure, we note, also acts as the clearing and settlement services for the transactions themselves, ensuring funds are available (and so they can be disbursed more quickly).

To get a sense of that global scope, Mastercard, in one of its own recently-announced initiatives, said it has launched an open banking collaboration with payment/software solutions provider Unzer makes Mastercard Unzer’s open banking partner in Germany, Austria and Denmark to broaden access to pay by bank.

It’s not all that much of a stretch to state that just as bank accounts, depending on the market (as we pointed out with the United States) are nearly ubiquitous, so too are the payment networks, and the cards themselves.

Visa’s earnings supplementals for the fiscal fourth quarter detailed that growth in debit cards out in the field, so to speak, stood at 8%, to 3.3 billion cards, outpacing the growth in the number of credit cards, which were 4% higher to 1.3 billion cards. Total payments volume for debit transactions were 9% higher in constant dollar terms, with a 7% commensurate metric for credit card payments. Mastercard’s earnings supplementals indicate that debit-based gross dollar volumes, globally speaking, were 10% higher than last year, outpacing roughly 6% growth in credit.

The debit card is a natural conduit here for A2A (and push to card) having been introduced back in the 1970s. And in terms of the mechanics of the direct-to-account fund flows — the debit card acts as an alias (and a unique identifier), without the need to expose bank account-level details — Visa bought Earthport in a move to scale Visa Direct through direct connection to bank accounts. Visa said in its most recent earnings announcement that Visa Direct transactions surged 38% year on year to 2.8 billion transactions. The company’s recent introduction of Visa+ payname also lets users link to accounts without exchanging bank-level details.