Pay by Bank: Why Account-to-Account Payments Are the Future

The payments industry is experiencing a fundamental shift. After decades of card network dominance, pay-by-bank — also known as account-to-account (A2A) payments — is emerging as a serious challenger. I — Myles Ndlovu — have been building payment infrastructure in this space, and the momentum behind A2A is unlike anything I’ve seen in fintech.

Why Cards Are Losing Ground

Credit and debit cards have been the default online payment method for over twenty years. But the economics have always been problematic for merchants. Interchange fees, processing charges, chargeback costs, and PCI compliance requirements add up to 2-4% of every transaction. For high-volume businesses, that’s millions in unnecessary costs annually.

Pay-by-bank eliminates the card networks entirely. The customer authorises a payment directly from their bank account to the merchant’s bank account. No Visa. No Mastercard. No interchange. The transaction cost drops to a fraction of card processing fees.

Open Banking Made This Possible

The regulatory push for open banking across Europe, the UK, and increasingly in Africa and Asia, created the API infrastructure that pay-by-bank relies on. Banks are now required to provide third-party access to payment initiation services through secure APIs.

This means a fintech company can build a payment flow where the customer selects their bank, authenticates with their existing banking credentials, and confirms the payment — all without entering a single card number. The user experience is faster, more secure, and eliminates the friction of typing in 16-digit card numbers on mobile devices.

The African Opportunity

In markets like South Africa, Nigeria, and Kenya, pay-by-bank has a distinct advantage: card penetration is relatively low, but bank account ownership and mobile banking adoption are high. Building payment infrastructure around bank transfers rather than cards aligns with how people in these markets already move money.

The integration of pay-by-bank with existing mobile money infrastructure creates a powerful combination. A customer in Nairobi can initiate a payment from their M-Pesa wallet or bank account with equal ease, and the merchant receives settled funds faster than they would through traditional card processing.

Real-Time Settlement Changes Everything

One of the most compelling advantages of A2A payments is settlement speed. Card payments typically settle in 2-3 business days. Pay-by-bank transactions can settle in real time or within hours, depending on the underlying payment rails.

For businesses, this transforms cash flow management. A retailer processing thousands of transactions daily no longer needs to wait days for funds to arrive. Real-time settlement means real-time access to revenue, which reduces the need for working capital facilities and short-term borrowing.

Security Without Complexity

Pay-by-bank leverages the customer’s existing bank security — biometrics, two-factor authentication, and device binding — rather than requiring merchants to handle sensitive card data. This eliminates PCI-DSS compliance requirements for merchants, reducing both cost and risk.

The chargeback problem that plagues card payments is also largely eliminated. Because pay-by-bank transactions require strong customer authentication at the point of payment, fraudulent transactions and friendly fraud disputes are dramatically reduced.

Building the Infrastructure

The technical challenge of pay-by-bank is aggregation. Each bank has its own API implementation, authentication flow, and settlement mechanism. Building a payment gateway that abstracts these differences and presents a unified API to merchants requires deep integration work across dozens of banking partners.

This is where the real value lies in payment infrastructure — not in the individual bank connections, but in the orchestration layer that routes payments optimally, handles failures gracefully, and provides merchants with a single integration point regardless of which bank their customer uses.

What Comes Next

Pay-by-bank is not just a cheaper alternative to cards. It enables entirely new payment models: variable recurring payments, request-to-pay flows, and embedded finance use cases that cards were never designed for. As open banking APIs mature and real-time payment rails expand globally, A2A payments will become the default for an increasing share of transactions.

The businesses that build their payment infrastructure around these rails now will have a significant advantage as the market shifts. The card networks know this — which is why they’re investing heavily in their own A2A capabilities. But the window for independent payment infrastructure companies to establish themselves in this space is wide open.