The Next Evolution of A2A Payments: Powering the UK’s Financial Future

The UK is at something of a crossroads when it comes to account-to-account (A2A) payments. Having revolutionised the way money moves through Faster Payments almost two decades ago, it now risks falling behind its global peers who have enthusiastically adopted A2A payments and created new use cases underpinned by highly innovative and competitive payments ecosystems. Will the UK stand still? Or, will it seek to reinvent payments once again?  

The Government has made clear that standing still is not an option. Last year, it set out its strategy to modernise UK payments with the publication of the National Payments Vision (NPV). This set out ambitions to create a world-leading, trusted and resilient payments ecosystem that fosters innovation, competition and security. 

As Peter Reynolds, EVP, Real-time Payments at Mastercard makes clear: “We are excited to support this once-in-a-generation opportunity for the UK to regain its global lead on A2A payments innovation and realise the ambitions set out in the NPV.” 

In a report commissioned by Mastercard, research by EY estimates a next generation A2A system, supported by effective government regulation, could generate efficiencies and productivity benefits leading to a welcome £9 billion boost to UK GDP within a five-year period. 

The big advantage of A2A payments over other forms is its speed, which in turn, supports cashflow and liquidity. Over 99% of UK businesses are small and medium-sized enterprises with cashflow and liquidity issues resulting from late payments regularly topping their list of concerns. With fewer delays in getting paid, a small business can be in better control of its finances, take better investment decisions and support economic growth.

Similarly, modernising A2A had the potential to transform retail payments between consumers and businesses, reducing payment friction and supporting growth – like it already is in many parts of the world. Thailand, for example, has seen explosive growth in A2A payments with over 81 million registrations of its real-time payment platform. Millions of small-scale merchants can now accept digital payments without the need to invest in payment terminals. A QR code allows customers to pay instantly using their smartphone and a digital wallet. 

Within the UK, the NPV sets the path for retail A2A capabilities at point of sale, which will enable greater consumer choice, other payments mechanisms such as NFC/ tap and more broadly, greater acceptance of digitised payments. It also supports growth, as Reynolds notes: “A2A at point of sale is especially important for smaller businesses – who will receive money faster, which is crucial in managing their cashflow, allowing them to buy new stock and build their businesses faster. There are also big benefits from reducing costs associated with handling cash payments.”
 

To scale A2A payments for consumers, the NPV makes it clear any future state must be resilient and prioritise security of payments, which is essential for trust and the ability to handle high transaction volumes. 

“When it comes to securing the ecosystem, fraudsters will always follow money,” says Reynolds. “But we are motivated to prevent them from harming consumers which is why Mastercard invests so heavily in services to protect people and build trust.” 

“Our A2A Protect solution is a model for the next generation where services can be overlaid on top of the A2A payment rails. In this case it seeks to protect customers from authorised push payment fraud by understanding the flow of transactions across the whole network.”
 

Given the speed of innovation in the payments ecosystem, the NPV makes clear that the future state must be resilient, but at the same time, flexible enough to encourage innovation and choice

This includes supporting interoperability between different domestic and international A2A payment systems, enabling cross-border money flows. Clearly, any new infrastructure will also need to enable digital asset currencies like stablecoins, which are on the agenda for many central banks – including the Bank of England – around the world. 

Enabling this innovation to meet the needs of the NPV requires infrastructure that is modular and extensible. Whilst the current iteration is stable and secure, adding new features is complex and far from straightforward. Upgrading A2A payments in the UK with next generation technology promises to allow fintechs and other providers to build innovative and inclusive solutions on top of the core technology.

The idea of adding more competition into the A2A ecosystem is welcomed by Reynolds: “For nearly a decade, we have been operating the UK’s A2A infrastructure since we acquired Vocalink and successfully building on its core capabilities as we expand A2A infrastructure globally. There is now the strategic opportunity to bring all these capabilities together into a best-in-class next generation infrastructure that pushes the UK to the frontier of A2A, enabling digital assets and retail payments in support of the NPVs aims.  This will allow fintechs and banks to drive innovation in the payments ecosystem, which can and will benefit the UK and its economy.”