The digital payment market’s velocity of change and volume, expected to reach $12.55 trillion by 2027, are staggering. Rapid payment technology innovations are giving new digital-first consumers more choices, and acquirers, solutions providers, and merchants must make informed decisions about how to position their companies to meet those demands.
Consider these payment trends gaining momentum going into 2023 as you update your business strategy for the new year.
The 2021 Mobile Wallets Report, published by Boku and Juniper Research, states that 1 in 2 people around the world will use a mobile wallet by 2025. China leads the world, with 45 percent of adults using this payment technology each day and 41 percent using it once per week. Only 6 percent of adults in the U.S. and Canada use a mobile wallet daily; however, analysts project growth in all regions.
Convenience is one of the factors driving adoption. Mobile wallets make it easy for consumers who primarily use their smartphones for online shopping to complete transactions with just a few clicks. Additionally, because consumers can use mobile wallets in-store as well as for online purchases, they provide one payment method shoppers can use on any channel.
- Online payments
E-commerce continues to grow. After record-shattering 31.8 percent growth in 2020, e-commerce growth is projected to continue at least through 2026. During the COVID-19 pandemic, consumers discovered the ease of browsing and ordering online for delivery or in-store pickup –and it appears these habits will continue long-term.
Although competitiveness in the B2C space requires accommodating the demand for online payments, another growing payment trend is online B2B payments. Businesses advancing their digital transformation plans are replacing paper-based accounts receivable processes with digital invoices and online payments. Online B2B payments save time, reduce costs, improve cash flow, and provide clients with a convenient way to pay.
- Embedded payments
Whether you call them super apps, embedded payments, or Payments 4.X solutions, they’re part of the payment trend toward moving transactions to the background of other experiences and minimizing friction. Developers are integrating payment technology with apps – a prime example is WeChat – social media, shopping, and special interest applications. Watch for payments integrations in more applications and systems throughout the new year.
- Tap to Phone
New payment technology is enabling merchants to accept contactless payments directly on a smartphone. Discover Global Network forecasts that the tap to phone market will grow to $76.3 billion at a 23.4 percent CAGR from 2021 to 2025.
A tap to phone solution can help level the playing field for small and medium-sized businesses (SMBs), allowing them to easily accept contactless payments without making a large CAPEX for upgraded payment technology. However, large and enterprise merchants can add these capabilities to their IT deployments to enhance customer experiences away from the checkout counter and outside the four walls of their stores.
- Payments without passwords
The Fast Identity Online (FIDO) Alliance is developing a protocol that uses biometrics and public key cryptography for identity verification. The protocol would allow consumers to log into various applications on different devices without having to enter passwords. It eliminates the problem of forgotten login credentials, but, more importantly, it has the potential to help prevent online fraud. It’s much harder to impersonate a user who logs in with a fingerprint or facial scan and access their payment accounts.
- Buy now, pay later
Analysts predict that more than 900 million consumers worldwide will use buy now, pay later (BNPL) services by 2027, up from 360 million in 2022. As inflation continues, industry experts look for more people to choose the option for high-value purchases in a budget-friendly manner. This payment method is most popular among Gen Z consumers; however, baby boomers on fixed incomes are also taking advantage of “pay in four” options.
- Green payments
Customers care more about sustainability than ever before. In fact, the number of Google searches for sustainable goods has increased by 71% around the world since 2016. It’s wise to align solutions with this payment trend by sourcing sustainable materials, replacing paper with digital statements and receipts, and supporting environmental causes.
Stay Up to Date with Payment Technology and Payment Trends
Payment technology innovation and consumer behaviors are setting the stage for adoption or growth in these areas, but as 2020 demonstrated, there are no guarantees. Something you can always count on is change. It’s important to stay apprised of activity in the payments space and understand how to use that information to propel your business forward.
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