The current system of setting up direct debits for payments like utility bills or childcare is fraught with issues. Consumers are required to fill out direct debit forms, sharing personal information and bank details that may not be secure. Additionally, static direct debits offer limited control over the payment amount, requiring advance notice for any changes or adjustments. This lack of flexibility can be frustrating for consumers and can lead to issues with unauthorized auto-renewals of subscriptions.
Visa’s new account-to-account (A2A) payment service aims to revolutionize the way consumers make recurring payments. By leveraging open banking technology, Visa will allow users to set up direct debits on merchants’ e-commerce stores with just a few clicks. This new service will enable consumers to monitor payments more easily and address any issues promptly through their banking app. Additionally, the A2A service will provide a level of protection similar to using a credit card, giving consumers peace of mind and control over their payments.
One of the key features of Visa’s A2A service is the ability to set up variable recurring payments (VRP). This new payment method allows consumers to make and manage recurring payments of varying amounts, providing much-needed flexibility. With VRP, consumers no longer have to worry about static direct debits that require advance notice for changes. This new payment option will give consumers the freedom to adjust payment amounts according to their needs without the hassle of canceling and setting up new direct debits.
Visa’s managing director for the U.K. and Ireland, Mandy Lamb, highlighted the company’s commitment to bringing pay-by-bank methods into the 21st century. By collaborating with UK banks and open banking players, Visa aims to create an open system for A2A payments to thrive. The acquisition of Tink, an open banking service, for 1.8 billion euros ($2 billion) further solidifies Visa’s commitment to innovation in the payment industry. This move allows Visa to stay ahead of emerging fintechs and provide consumers and merchants with new payment options.
As Visa prepares to launch its A2A service in the U.K. and other parts of Europe in 2025, the payment industry is poised for a significant shift. By leveraging open banking technology and offering consumers flexible payment options like VRP, Visa is paving the way for a more streamlined and secure payment experience. However, challenges lie ahead, particularly in terms of monetizing the new service and potential cannibalization of Visa’s card business. Despite these challenges, Visa remains committed to enabling the best ways for people to pay and get paid, whether through traditional card transactions or innovative non-card methods.