A2A payments without open banking: does it matter?

Adam has served as Boku’s Chief Product Officer since 2012. As Head of Product, Adam has directed a wide variety of new product innovations related to instant payments, card linked offers, direct carrier billing, bundling, mobile wallets...

He recently attended and participated in a panel at Money 2020 Europe titled The Checkout Revolution: What merchants need to embrace Pay by Bank. Here are some of his thoughts:

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By spotlighting merchant needs, the aim was to inspire influential attendees, especially banks and regulators, to push for changes that make open banking more appealing to eCommerce merchants. After all, given the well documented success of UPI in India and Pix in Brazil, surely there is an easy playbook for Europe to replicate?

But driving change through public discussions about merchant needs can feel futile when open banking is shaped by complex layers of legislation and government interpretation. Sure, there are some hopeful expectations attached to the arrival of PSD3 (Payment Services Directive) but personally I’d prefer not to hitch the success of Pay by Bank solely to the success of European open banking.

Why not? Because Pay by Bank has already found alternative paths much like the Dutch banks (aka Currence) that had started iDEAL way back in 2005. And frankly, I think that’s a great thing because it's still Pay by Bank and it still takes us in a positive direction for European payments. 

I understand the appeal of a story book narrative that has Pay by Bank succeeding through some beautiful collaboration between central banks, participating financial institutions, merchants, and third-party providers making the network both open and public. It might be true that open banking may provide important infrastructure. But mass adoption often gains momentum through strategic, unified efforts by private bank consortiums - not purely open ecosystems. Driven by shared goals and commercial interest, these bank-led consortiums often do a better job of creating the conditions Pay by Bank needs to thrive.

Why consortiums often win the race to popularize Pay by Bank:

Unified Brand and Trust

‍Consortiums create a single, recognizable brand that benefits from the existing trust consumers have in their banks. This immediately builds confidence and familiarity.

Deep Integration and Seamless UX

‍These schemes are also designed for a mobile-first experience, either by integrating into each bank’s mobile app or by offering their own branded app that can initiate payments from any participating bank. While similar in user experience to open banking, they operate within a smaller, more controlled ecosystem.

Shared Investment and Promotion

‍Participating banks collectively invest in the infrastructure, marketing, and ongoing development, ensuring sustained commitment to the scheme's growth.

Clear Governance and Rules

‍Consortiums can establish their own clear rules for participation, dispute resolution, and fraud management, leading to greater consistency and operational efficiency.

Commercial Alignment

‍The banks involved have a direct commercial interest in the success of "their" A2A scheme, fostering internal promotion and a willingness to overcome challenges.

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Europe offers plenty of success stories that prove this model works - Twint in Switzerland, BLIK in Poland, Bizum in Spain, Swish in Sweden, Vipps in Norway, and MBWay in Portugal. The latest is EPI (European Payments Initiative), set to launch Wero, a new Pay by Bank service expected to support eCommerce in Germany and Belgium this year.

While open banking provides the necessary pipes, the most effective drivers of Pay by Bank adoption often come from unified, bank-led initiatives that prioritize a seamless, branded user experience and shared commercial goals.

In an ideal world, everything would be fully open and public. But if regulation sets the foundation and bank consortiums are able to lead with strategic collaboration and innovation, we can still achieve broad adoption and long-term sustainability.

And in that scenario, does it really matter how we get there, as long as we achieve better outcomes for consumers, merchants, and financial institutions?