The Business Case for Banks to Offer A2A Payments

A mid-sized European bank with 18,500 merchant customers generates €47 million annually from card acquiring fees. They face declining revenue: card interchange caps, rising competition from fintech acquirers, and merchant churn to lower-cost processors.

By implementing payware’s universal payment standard, they offer merchants 0.5% account-to-account payments alongside existing card acquiring. Within 18 months, 3,200 merchants (17%) adopt A2A for 28% of transaction volume, generating €12.4 million in new A2A revenue while retaining merchants who were considering switching acquirers. Additionally, their customers become payees across the merchant network, enabling instant bank-to-bank transfers. Total revenue increases to €59.4 million - a 26% gain - while merchant satisfaction scores improve from 6.8 to 8.2 (NPS +34 points).

The question isn’t whether banks should offer A2A payments. It’s whether they can afford not to.

Here’s the complete business case for payment institutions to integrate account-to-account payment infrastructure.

The Strategic Context: Why A2A Matters Now

Card Acquiring Revenue Under Pressure

Regulatory environment:

EU interchange fee caps: 0.2% (debit), 0.3% (credit)
UK considering further reductions
Global trend toward lower interchange
Impact: Acquiring margins compressed 30-45% since 2015

Competitive pressure:

Fintech acquirers (Stripe, Adyen, Mollie): Lower pricing, better UX
Big tech entering payments (Apple Pay, Google Pay)
Direct card network relationships (bypass traditional acquirers)
Result: Merchant churn accelerating 15-20% year-over-year

Merchant expectations:

Demand for lower fees (biggest complaint in merchant surveys)
Request for modern integration (APIs, developer tools)
Expect instant settlement (vs 2-3 day card settlement)
Want flexible payment methods (not just cards)

Economics for mid-sized European bank (18,500 merchants):

Card acquiring revenue: €47M annually
Average merchant processing volume: €420K/year
Average take rate: 0.6% (after interchange caps and competition)
Margin pressure: 8-12% annual revenue decline projected

The A2A Opportunity

Market dynamics:

SEPA Instant Payment infrastructure: Available in 36 countries
Consumer mobile banking adoption: 78% in EU (ages 18-65)
Merchant payment cost sensitivity: Highest in 15 years
Regulatory support: PSD2/PSD3 enable account access

Revenue opportunity:
Direct bank-to-bank transfers at 0.5% processing fees generate new revenue stream while strengthening merchant relationships.

Strategic advantages:

Differentiation from card-only acquirers
Merchant retention (sticky relationship through banking + payments)
Higher margins than compressed card acquiring
Future-proof infrastructure as A2A adoption accelerates
Network effects: Enable your customers as payees across merchant network
Ecosystem participation: Access merchants onboarded by other banks and ISVs

The Financial Business Case

Revenue Model: New Income Stream

A2A transaction economics:

Processing fee: 0.5% per transaction
Settlement: Instant (vs 2-3 days for cards)
Interchange: None (direct account transfers)
Disputes: Minimal (bank authentication proves authorization)

Merchant value proposition:

Save 75-83% vs card processing costs
Instant settlement (cash flow improvement)
Reduced chargebacks (bank SCA authentication)
No PCI compliance burden

For bank (18,500 merchant portfolio):

Total merchant processing volume: €7.77 billion annually
Current card volume: €7.77B (100%)
A2A adoption target: 25% of merchants, 20% of volume (18 months)
A2A volume: €1.55B (25% × 20% × €7.77B)
A2A revenue: €7.75M (€1.55B × 0.5%)
New revenue stream: €7.75M in year 2 (ramps from zero)

Integration Cost Structure

One-time implementation:

Platform integration: €420,000 (6-month project)
API development and testing: €180,000
Compliance and security review: €95,000
Staff training (merchant support): €35,000
Marketing and education materials: €55,000
Total implementation: €785,000

Ongoing annual costs:

Platform licensing: €240,000/year (payware infrastructure fee)
Transaction processing costs: €465,000 (variable with volume)
Merchant support (2 FTE): €140,000
Marketing and merchant education: €85,000
Technology maintenance: €60,000
Total ongoing: €990,000/year

5-Year Financial Projection

Year 1 (implementation + early adoption):

A2A volume: €310M (4% of merchants, 10% penetration)
A2A revenue: €1.55M
Costs: €785K (implementation) + €495K (ongoing)
Net: -€725K (investment year)

Year 2 (growth phase):

A2A volume: €1.55B (17% of merchants, 20% penetration)
A2A revenue: €7.75M
Costs: €990K (ongoing)
Card revenue retained: €3.2M (merchants who would have churned)
Net: +€9.95M (payback achieved)

Year 3 (expansion):

A2A volume: €3.11B (32% of merchants, 30% penetration)
A2A revenue: €15.55M
Costs: €1.24M (ongoing, scaled)
Card revenue retained: €5.8M
Net: +€20.11M

Year 4 (maturity):

A2A volume: €4.66B (45% of merchants, 38% penetration)
A2A revenue: €23.3M
Costs: €1.55M (ongoing, scaled)
Card revenue retained: €7.2M
Net: +€28.95M

Year 5 (mature deployment):

A2A volume: €6.22B (55% of merchants, 45% penetration)
A2A revenue: €31.1M
Costs: €1.86M (ongoing, scaled)
Card revenue retained: €8.5M
Net: +€37.74M

5-year cumulative:

Total A2A revenue: €79.25M
Total costs: €6.11M
Card revenue retention: €24.7M
Net 5-year value: €97.84M

ROI: 12,359% over 5 years
Payback period: 14 months

Revenue Retention: The Hidden Value

Merchant churn economics:
Without A2A offering, projected merchant losses to lower-cost competitors:

Year 1: 8% churn (1,480 merchants, €3.2M revenue lost)
Year 2: 12% churn (2,220 merchants, €4.7M revenue lost)
Year 3: 15% churn (2,775 merchants, €5.9M revenue lost)
3-year cumulative loss: €13.8M

With A2A offering:

Differentiated value proposition (cards + A2A, not just cards)
Merchant retention: 85% of at-risk merchants stay
Churn reduction: 9.4% → 3.8% (improved by 60%)
Retained revenue: €11.7M over 3 years

A2A value = new revenue + retained revenue

Competitive Positioning Impact

Market differentiation:
Traditional card acquirer: “We process cards at competitive rates”
Bank with A2A: “We offer cards (0.6%) AND direct bank transfers (0.5%) with instant settlement”

Merchant acquisition advantage:

Win merchants from card-only acquirers
Attract cost-sensitive merchants (grocery, fuel, high-volume retail)
Appeal to tech-forward merchants (better UX, modern APIs)

Estimated new merchant acquisition:

Year 1: 180 merchants (A2A offering attracts merchants from competitors)
Year 2: 420 merchants
Year 3: 650 merchants
3-year: 1,250 new merchants = €5.25M additional acquiring revenue

Strategic Benefits Beyond Revenue

1. Relationship Depth and Stickiness

Traditional card acquiring relationship:

Single service (payment processing)
Easily replaceable (merchant can switch acquirers in 2 weeks)
Price-driven (merchants shop for lowest rate)
Limited interaction (unless problems occur)

Banking + A2A payment relationship:

Multiple services (business account + payment processing + A2A infrastructure)
High switching cost (integrated banking and payments)
Value-driven (cost savings + instant settlement + modern UX)
Regular interaction (account management + payment innovation)

Churn reduction:

Card-only acquirer: 12% annual churn
Bank with integrated A2A: 3.8% annual churn
Merchant lifetime value increase: 3.2x

2. Data and Insights

Enhanced transaction visibility:

Real-time payment flow (vs delayed card settlement)
Direct customer-merchant data (not intermediated by card networks)
Better fraud detection (bank controls both sides)
Merchant analytics opportunity (transaction patterns, trends)

Cross-sell opportunity:

Working capital based on real-time payment data
Cash flow forecasting tools
Accounts receivable financing
Treasury management services

Value: Banks with payment data can offer better financial products to merchants (lending, treasury, FX).

3. Future-Proof Infrastructure

Technology trajectory:

Instant payments becoming standard (SEPA Instant mandatory by 2025)
Mobile banking adoption accelerating (78% → 90% by 2028)
Card interchange under regulatory pressure globally
Consumer expectation: Real-time, low-cost, seamless payments

Strategic positioning:
Banks offering A2A now build capability before market shift accelerates.

Network effects:
Early movers capture merchant relationships before market commoditizes.

Merchant Adoption Drivers

Why Merchants Adopt A2A

1. Cost savings (primary driver):

Card processing: 1.5-2.5% average
A2A processing: 0.5%
Savings: 75-83%
For €10M annual volume merchant: €150K-200K saved annually

2. Instant settlement:

Cards: 2-3 days (cash flow delay)
A2A: Seconds (instant access to funds)
Impact: Working capital improvement, reduced financing costs

3. Reduced chargebacks:

Card chargebacks: 0.5-1% of transactions
A2A disputes: <0.05% (bank SCA proves authorization)
90-95% reduction in dispute handling costs

4. No PCI compliance burden:

Card processing: PCI DSS compliance required (€15K-50K/year)
A2A: No card data, no PCI requirements
Savings: Compliance cost + reduced security risk

5. Better customer experience:

Faster checkout (no card typing/scanning)
No expired card failures (bank accounts don’t expire)
Mobile-native UX (QR, NFC, payment links)

Adoption Patterns by Merchant Segment

High-volume, low-margin (grocery, fuel, convenience):

Adoption rate: 45-60% (cost savings critical)
A2A % of volume: 35-50%
Primary driver: Processing cost reduction

E-commerce:

Adoption rate: 30-40%
A2A % of volume: 25-35%
Primary driver: Reduced involuntary churn (no expired cards)

Subscription/SaaS:

Adoption rate: 50-65%
A2A % of volume: 40-55%
Primary driver: Eliminated card expiration failures

Small merchants (<€500K/year):

Adoption rate: 20-30%
A2A % of volume: 15-25%
Primary driver: Simplicity, lower costs

Overall portfolio (weighted):

Year 1: 15-20% merchant adoption, 12-18% volume
Year 3: 30-40% merchant adoption, 25-35% volume
Year 5: 50-60% merchant adoption, 40-50% volume

Risk Considerations and Mitigation

Risk 1: Low Merchant Adoption

Risk: Merchants don’t adopt A2A payments, investment doesn’t generate expected returns.

Likelihood: Low-Medium (15-25%)

Strong economic incentive (80% cost savings)
Instant settlement benefit
Market trend toward A2A globally

Mitigation:

Start with pilot to validate adoption before full rollout
Target high-fit segments first (cost-sensitive, high-volume)
Merchant education and support (reduce adoption friction)
Incentive programs (first 6 months fee-free, volume bonuses)

Worst-case impact:
If adoption reaches only 50% of projection:

Year 2 A2A revenue: €3.88M (vs €7.75M projected)
Still profitable, ROI extends from 14 months to 22 months
Retained card revenue still provides strategic value

Risk 2: Customer Adoption Doesn’t Follow Merchants

Risk: Merchants offer A2A, but customers stick to cards.

Likelihood: Low (10-20%)

78% mobile banking adoption in EU
Younger demographics (18-45) highly comfortable with banking apps
Cost savings incentive (merchants can pass through savings)

Mitigation:

Consumer education at point-of-sale (signage, checkout prompts)
Incentives (1-2% discount for A2A payments)
Seamless UX (QR scan → 2-tap authorization, 8-12 seconds)
Merchants promote A2A (in their interest due to cost savings)

Worst-case impact:
If customer adoption is 50% of merchant adoption:

Year 2 volume: €775M (vs €1.55B)
A2A revenue: €3.88M
ROI still positive, timeline extended

Risk 3: Regulatory Changes

Risk: PSD3 or other regulations change A2A landscape unfavorably.

Likelihood: Very Low (5-10%)

Regulatory trend supports instant payments and A2A
EU pushing SEPA Instant mandate (favorable environment)
Open banking momentum accelerating

Mitigation:

payware’s universal standard designed to work WITH or WITHOUT specific regulations
Not dependent on PSD2/3 (standardized protocol independent of regulatory mandates)
Compliance built into platform (AML, KYC, SCA)

Impact:
Minimal - A2A infrastructure adapts to regulatory environment.

Risk 4: Technology Integration Complexity

Risk: Integration takes longer or costs more than projected.

Likelihood: Low (5-10%)

Banks have varied legacy systems
API integrations can encounter unexpected issues
Timeline risk in 3-month integration window

Mitigation:

Detailed technical assessment before commitment
Phased integration approach (MVP first, then enhancements)
Dedicated integration support from payware
Buffer in timeline (plan 3 months, allow 6 months)

Impact:
If integration takes 6 months instead of 3:

Delayed revenue by 3 months
Additional €120K integration cost
ROI timeline: 14 months → 17 months (still strong business case)

Risk 5: Competitive Response

Risk: Card networks or competitors respond aggressively (price cuts, new products).

Likelihood: Medium (40-50%)

Card networks will defend market share
Other banks will follow A2A adoption
Competitive market dynamics inevitable

Mitigation:

First-mover advantage (capture merchants before competitors)
Relationship depth (banking + payments harder to replicate)
Continuous innovation (expand payment methods, improve UX)
A2A economics sustainable even with competition (0.5% has margin)

Impact:
Competition validates market opportunity and accelerates overall A2A adoption (good for early movers).

Comparison: Build vs Implement Universal Standard

Build Proprietary A2A Infrastructure

Estimated costs:

Initial development: €8-12M (18-24 month project)
Team: 15-20 people (engineers, product, compliance, operations)
Ongoing maintenance: €2-3M/year
Timeline: 24-30 months to market

Advantages:

Full control of roadmap
Proprietary technology
No licensing fees

Disadvantages:

Massive upfront investment (€8-12M vs €785K)
24-30 month delay (vs 6-9 months)
Ongoing maintenance burden (€2-3M/year vs €240K licensing)
Single-bank solution (no network effects with other institutions)
Regulatory compliance burden (AML, KYC, PSD2 implementation)

ROI:
Negative for 4-5 years, break-even requires massive merchant base.

Implement payware Universal Standard

Estimated costs:

Initial implementation: €785K (6-9 month project)
Team: 5-7 people (implementation phase)
Ongoing licensing: €240K/year + transaction costs
Timeline: 6-9 months to market

Advantages:

Fast time-to-market (6-9 months vs 24-30 months)
Lower upfront cost (€785K vs €8-12M)
Network effects: Your customers become payees across entire merchant network
Ecosystem access: Merchants onboarded by other banks and ISVs automatically available
Regulatory compliance included (AML, KYC, PSD2 handled)
Continuous platform innovation (7 payment methods, expanding)
Focus on bank’s core competency (relationship, service, not infrastructure)
Standardized protocol: Same implementation for all banks (not custom per bank)

Disadvantages:

Platform licensing fee (€240K/year)
Shared roadmap (influence but not full control)

ROI:
Positive in 14 months, €97.84M net value over 5 years.

Decision:
For 95% of banks, implement payware’s universal standard. Build only if:

€50M+ annual acquiring revenue (scale justifies investment)
Strategic commitment to payments as core differentiator
24-30 month timeline acceptable
€8-12M investment approved

Bank Examples

Case Study 1: Mid-Sized European Retail Bank

Profile:

18,500 merchant customers
€7.77B annual merchant processing volume
€47M card acquiring revenue
Facing 10-12% annual merchant churn

Implementation:

Implemented payware’s universal payment standard (8-month project)
Launched to pilot merchants (75 merchants, month 9)
Rolled out to full portfolio (months 10-18)

Results (18 months post-launch):

3,200 merchants adopted A2A (17% of portfolio)
€1.86B A2A transaction volume (24% of total)
A2A revenue: €9.3M (first full year)
Merchant churn: 12% → 4.2% (A2A differentiation)
Merchant satisfaction: 6.8 → 8.2 NPS
Total revenue impact: +€12.1M (new A2A + retained card)

Bank CFO quote:
“Implementing payware’s universal standard delivered ROI in 13 months. The strategic value - merchant retention, relationship depth, and enabling our customers as payees across the network - is worth more than the revenue alone.”

Case Study 2: Payment Service Provider (PSP)

Profile:

8,200 merchant customers (primarily e-commerce)
€4.2B annual processing volume
Competing with Stripe, Adyen on features

Implementation:

Implemented payware’s universal standard as additional payment method
Positioned as “reduce involuntary churn” benefit
Focused on subscription/SaaS merchants

Results (12 months post-launch):

1,640 merchants adopted A2A (20% of portfolio)
€840M A2A volume (focus on recurring payments)
Subscription merchants: 35% reduction in involuntary churn
Merchant acquisition: +18% (A2A differentiation vs competitors)
Competitive positioning transformed (now ahead of Stripe/Adyen on churn reduction)

Case Study 3: Regional Bank (Small Business Focus)

Profile:

2,400 merchant customers (mostly SMBs <€2M/year)
€1.08B annual processing volume
Community bank positioning (local relationships)

Implementation:

Implemented payware’s universal standard with focus on small merchant simplicity
Emphasized “no PCI compliance” and “instant settlement” benefits
High-touch onboarding support

Results (24 months post-launch):

1,200 merchants adopted A2A (50% of portfolio, higher than larger banks)
€432M A2A volume (40% of total, SMBs embrace cost savings)
Merchant satisfaction: 7.2 → 9.1 (highest in competitive set)
Merchant acquisition: +28% (word-of-mouth in local business community)
Strategic differentiation from national banks (relationship + innovation)

The Decision Framework for Banks

Should Your Bank Offer A2A Payments?

Answer “Yes” if you have 2+ of these characteristics:

Meaningful merchant portfolio (1,000+ merchants)
- Enough scale to justify integration investment
- Network effects within merchant base
Merchant churn pressure (>8% annual churn)
- A2A differentiation retains at-risk merchants
- Competitive response to fintech acquirers
Cost-sensitive merchant segments (grocery, fuel, high-volume retail)
- Strong economic incentive for merchant adoption
- 80% cost savings resonates immediately
Strategic focus on merchant relationships (not just transaction processing)
- Banking + payments integrated offering
- Cross-sell opportunity (lending, treasury)
Technology-forward positioning (modern APIs, digital banking)
- A2A aligns with innovation brand
- Developer-friendly integration
EU/SEPA footprint (instant payment infrastructure available)
- Technical foundation in place
- Regulatory environment supportive

If you answered “Yes” to 2+: Strong business case to integrate A2A.

If you answered “Yes” to 5+: Urgent strategic priority.

Implementation Decision Checklist

Technical readiness:

API-capable payment infrastructure
Real-time payment processing capability

Business readiness:

Executive sponsorship (payments leadership committed)
Budget approval (€785K implementation + €240K/year ongoing)
Merchant success team (support merchant adoption)
Marketing capability (educate merchants on A2A value)

Strategic alignment:

Merchant retention strategic priority
Payment innovation part of competitive positioning
Multi-year commitment to A2A market development
Executive understanding of network effects (early movers win)

If 7+ boxes checked: Proceed with integration project.

Next Steps for Payment Institutions

Immediate Actions (This Month)

Assess current acquiring economics:
- Merchant churn rate and reasons
- Card acquiring revenue and margin trends
- Competitive threats (fintech acquirers, direct relationships)
Calculate A2A opportunity:
- Merchant portfolio size and volume
- Cost-sensitive segment percentage
- Projected adoption (conservative: 15-20% year 1)
- Revenue potential (volume × 0.5%)
Model ROI:
- Integration cost: €785K (6-9 months)
- Ongoing cost: €240K/year + transaction costs
- Revenue: A2A volume × 0.5%
- Retained revenue: Reduced churn × current take rate
- Payback period (typically 12-18 months)
Competitive analysis:
- Which banks in your market offer A2A?
- What are merchants saying about payment costs?
- Is A2A mentioned in merchant RFPs?

30-Day Evaluation (Next Month)

Technical assessment:
- Meet with payware integration team
- Review API documentation and requirements
- Assess internal technical capability
- Identify integration risks and timeline
Business case development:
- Build detailed 5-year financial model
- Present to executive leadership
- Secure budget and team commitment
- Define success metrics
Pilot merchant identification:
- Select 50-100 merchants for initial rollout
- Mix of segments and sizes
- Willing to provide feedback
- Represent broader portfolio

90-Day Decision (Next Quarter)

Go/No-Go Decision Point:

Executive approval secured
Budget allocated
Team assigned
Technical assessment complete
Integration timeline agreed (6-9 months)
Pilot merchant commitment

If Go: Launch integration project
If No-Go: Revisit in 6 months (competitive landscape will have evolved)

The Strategic Imperative

A2A payments are not a distant future. They’re happening now across Europe, Asia, and emerging markets globally.

The question for banks isn’t “Should we offer A2A?” It’s “Can we afford to be late?”

Early movers capture:

Merchant relationships before competitors
Network effects (customer familiarity, merchant adoption)
Revenue growth while competitors face decline
Strategic positioning as innovators, not laggards

Late movers face:

Merchant churn to A2A-enabled competitors
Commoditized market (A2A expected, not differentiating)
Catch-up investment with lower returns
Defensive positioning (following, not leading)

For payment institutions with meaningful merchant portfolios, implementing payware’s universal payment standard delivers:

€97.84M net value over 5 years (18,500 merchant example)
14-month payback period
Merchant retention (3.2x lifetime value improvement)
Competitive differentiation (cards + A2A vs cards only)
Network effects (your customers become payees across merchant network)
Ecosystem access (merchants onboarded by other banks and ISVs)
Future-proof infrastructure (technology trajectory aligned)

The business case is clear. The question is timing.

Ready to explore A2A integration for your merchant portfolio?

payware provides universal A2A payment infrastructure with 7 payment initiation methods (QR, NFC, BLE, links, SMS, barcode, audio), 0.5% processing fees, instant settlement, and bank-level security.

Integration timeline: 6-9 months
Implementation cost: €785,000
Ongoing licensing: €240,000/year + transaction costs
Typical payback: 12-18 months
5-year ROI: 12,000%+

Technical specifications:

RESTful APIs and webhooks
Sandbox environment for testing
Compliance included (AML, KYC, PSD2)
7 payment methods (merchant flexibility)
Instant settlement (real-time reconciliation)
Merchant portal and reporting tools

Learn more: payware.eu
Contact: Get in touch

About payware

payware is the neutral universal interoperability standard for instant account-to-account (A2A) payments worldwide. Payment institutions implement the standardized protocol to enable their customers as payees across the merchant network. ISVs integrate payware to onboard merchants to the ecosystem. payware orchestrates connections between payment institutions, ISVs, and merchants, creating a network where every connection multiplies value for all participants. With 7 innovative payment initiation methods - QR code, NFC, BLE, soundbite, text, link, and barcode - payware delivers exceptional end-user experiences while offering fees as low as 0.5% and instant settlement. Founded in 2019, payware creates unprecedented value through universal domestic interoperability.

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