On August 5, 2019, the Federal Reserve Board announced plans to develop an around-the-clock, real-time payment and settlement service, called the FedNow℠ Service. This is an outcome of the Federal Reserve’s much publicized Faster Payments initiative. At this time, it’s premature to speculate about FedNow’s impact to issuers, but one thing is certain—faster payments are already a reality for debit issuers and networks.
PULSE has supported fast authorization and clearing services for what the 2019 Debit Issuer Study termed "Account-to-Account (A2A) payments*" for several years. More issuers, merchants and businesses are supporting A2A payments through debit networks like PULSE. The Study, commissioned by PULSE and conducted by Oliver Wyman, reveals that more than 1 billion A2A transactions were processed by debit networks last year.
Unlike cash withdrawals, card-present and card-not-present purchases, A2A transfers involve direct access to Demand Deposit Accounts (DDAs) without the need for a physical intermediary in the form of cash or card. Most of these transactions take place in apps or on websites.
According to the Study, debit networks’ A2A use cases include three broad categories—Person-to-Person (P2P), Business-to-Consumer (B2C) and Digital Wallets. P2P money transfers are the most well-known. Think Zelle or Venmo. B2C payouts include funds disbursements and gig-economy payments.
An example of a funds disbursement is an insurance payout. The insurer replaces a slower paper check or ACH payment with a faster deposit directly into the customer’s account via their debit card. Similarly, an example of a gig-economy A2A transfer is a ride-share company, like Uber or Lyft, more quickly paying drivers. Issuers see the importance of these transactions, as they receive interchange on both funding and credit transactions.
These examples are only the tip of the iceberg. There are many other use cases and ways our debit transactions can accommodate ever-changing consumer expectations and lifestyles. And our team of payments experts is working to add more of them of them all the time. We added 25 new sending organizations in the second quarter of this year alone.
To read more insights about A2A payments, issuers’ digital capabilities, contactless cards, mobile payments and other trends from the 2019 Debit Issuer Study, click here.
*A2A payments as referenced here include person-to-person transfers, business-to-consumer "push" payments and consumer-to-business payments, most of which take place in apps or on websites. Push payments are used for the disbursement of funds in cases such as paying gig-economy workers and settling insurance claims.