Seismic payments shift ahead
2022 is shaping up to be a year of seismic change in the payments business. In Part 1 of our series and today’s Part 2, a clear pattern emerges from the insights of our industry leaders. As Trevipay’s Brandon Spear says, last year was a “crash course” in B2B innovation and fraud. That applies across the board in every segment.
The continued growth of fraud and identity theft concerns me. As a result, I expect to see much new development in combating fraud, chargebacks, and other challenges plaguing online and in-store merchants.
Meanwhile, our experts predict more BNPL, industry consolidation, continued innovation, new use cases, growing cryptocurrency interest, real-time payments rising, Earned Wages growth ahead, more Canadian consumer inclusion, lower transaction costs, and US consumers finally opening their digital wallets.
I’m optimistic these fintech innovators, who have met substantial challenges in the past year, are more than up to whatever is on the horizon. I wish you all continued success and exciting possibilities in the New Year. ~ Douglas Hall, entrepreneur, investor & Publisher, PaymentsNEXT
Crash course in B2B innovation, fraud & identity theft
2021 was a continuation in crash course digital innovation for businesses worldwide, especially those focused on B2B commerce. Expectations and demand for seamless online experiences became critical. Having an online presence quickly became a necessary and important part of driving commerce with the onset of the pandemic. As the demand for e-commerce options continued to grow rapidly, so did the need for a seamless customer experience with frictionless and secure transactions. The last year has been all about finding ways to serve the new digital customer, forcing many B2B companies to get on board with this new normal.
As B2B companies continue to expand their online offerings in the New Year, it’s important to acknowledge and get ahead of the growing risk of B2B business identity theft and other forms of fraud. Leveraging data to offer instant decisioning and credit can strengthen the relationship between buyers and sellers by providing sophisticated fraud detection processes and maintaining a strong track record for risk decisioning. This is particularly important in B2B as business customers are more frequently looking to purchase with a purchase order, on trade credit and have a dedicated financial relationship with a business. ~ Brandon Spear, CEO, TreviPay
Cost reductions, BNPL, crypto & consolidation ahead
As customers change the ways they shop and pay, merchants will have to offer a wider range of alternative payment methods that not only offer consumers options at checkout but also reduce their cost of acceptance. For SMBs, the largest line-item cost can often be acceptance of payments. With that in mind, they want to offer consumers more peer-to-peer payment options, such as Amazon allowing customers make purchases using Venmo starting next year.”
Companies entering the BNPL space are making a smart move because it shows they’re thinking about how to make this service more accessible across the board. Our economy thrives when SMBs thrive, so we need more technology like BNPL that will drive the consumer to make a purchase in the end. GenZ is thinking more about savings than most previous generations, so BNPL helps SMBs attract the consumer that’s sticking with their budget. The only way to grow any business is to start thinking about building your business model for younger generations and improved digital payments are key to survival in this industry, so I anticipate even more rapid growth here next year.
Crypto and NFTs are only going to grow, so businesses that get in there first with the right kinds of fintech firms and banks will be the ones that thrive long term. Many organizations are still looking for the right use cases and reasons to get behind crypto as a payment method, and I predict that we’ll see more of those use cases come to light in 2022. Security has been one of the major concerns with crypto with technology firms building stronger solutions to secure all forms of digital payments. This opens up the possibilities for further enabling commerce.
We’ll see more companies opting to buy new payment capabilities through M&A. This year, I’ve seen many PE firms and VCs at the major tech conferences, and they’re investing in tech because they know that SaaS companies will be the next big drivers of payments. The larger payment companies have the dollars to consume those small fintechs, and a great example is the Paypal acquisition of Paidy this year. Instead of going through prototypes, design and delays associated with development, they can grow a lot larger and faster through M&A and expand their existing customer base by bringing new services. ~ Menda Sims, Chief Payment Officer, Stax
Covid drives new payment use cases & engagement this
The growing intersection of software and payments is enabling businesses to find new efficiencies, and improve their ability to engage with customers. This has been common in e-commerce for some time but is really starting to take off in industries that deal with high-stakes, high-value payments in large markets. The digitization of payments overall has been a major trend this past year, with COVID forcing permanent behavior change – even in some industries that were historically digitally underserved.
Flywire recently completed a survey of more than 1,000 consumer patients in the US that uncovered 65% of Americans who paid their medical bills online for the first time during COVID-19 plan to continue using online methods for payments going forward.
As consumers demand more digital-first engagement, we’ll continue to see more use cases of software driving value in payments across all industries. For example, educational institutions are customizing payment plans to closely mirror needs dictated by the varied financial circumstances of their students. Healthcare providers are using analytics to build personalizedpayment plans that boost collection, and empower patients by offering a look at the costs of some medical procedures before they’re completed. Travelers are also factoring in ease of payment to their trip choices, and we’ll see companies in the B2B space increasingly lean on fintech to make payments a growth enabler. ~ Mohit Kansal, VP of Global Payments, Flywire
Digital-first, BNPL corrections, fraud & uncertainty challenges ahead
The impact of COVID continued to grow, forcing wholesale prioritization around digital-first payment strategies. Our challenges were really to ensure high level service for the growing queue of merchants opting to utilize payments orchestration as their default tool for payments strategies.
The speed of break-up of the payments value chain combined with the high rate of commoditization certainly raised a few of our eyebrows. Not entirely unexpected. I think one of the most surprising developments was the accelerated decline of BNPL stock prices. We were anticipating a slightly slower correction. We’re going to see faster adoption of account-to-account payments. Reducing transaction costs and emerging as a viable alternative to scheme-based payments with near on-par consumer experience seems like a win to us.
Much as with 2021 uncertainty remains the biggest challenge for many on a business level, while other issues such as fraud also remain a concern. Apart from these, merchants are still wrestling to handle the pace and fragmentation across the sector. The rate at which new vendors arrive (and in some cases leave) makes building a resilient, predictable payment strategy hard. ~ Rob Lincolne, CEO, Paydock
Paying employees properly as Earned Wage appeal grows
In 2021, the entire payments ecosystem shifted to meet the growing need for digital transactions and consumer demand for convenient online experiences. However, we must all remember that the desire for seamless payments experiences extends far beyond the consumer purchasing journey. Today’s hourly employees, for example, want to feel valued and that includes having control over their earnings/pay. How workers get paid is just as important when it comes to employment preferences and selection.
Paying employees properly is critical for employers to understand what they can do, beyond raising wages, to ensure their workforce can feel more financially stable and optimistic about their future. Research showed that more than half (57%) of hourly workers say they feel financially insecure and that they want on-demand access to earned income through an earned wage access provider/solution. In fact, workers would consider changing employers to get earlier access to wages they’ve earned.
My prediction for the new year and beyond? Employers who look “outside the box” to help their workforce manage, and stabilize their financial security, will stand out in the hiring landscape/crowd and be able to attract and retain more loyal, productive and financially stable workers. ~ Kelley Knutson, President, Netspend
Real-time rising, lowering friction, shifting liability to buyers
There has been lots written about real-time payments in 2021, but in 2022, the promise becomes a reality. For one, customers want goods shipped more quickly, and suppliers will prioritize buyers who pay more quickly. Two, sellers (as always) want to reduce their cost of getting paid and get paid more quickly. That means avoiding card payments wherever it makes sense. And three, everyone wants to reduce the risk of fraud.
Bank-powered real-time payment (RTP) rails not only speed up payments, they also reduce the cost of the payment and reduce the risk of fraud. When a customer pays on a website, the responsibility for fraud is on the seller. If the product gets returned and the buyer used a card, the seller has chargeback rates. RTPs shift that chargeback risk (#1 in the credit card business) to the buyer. The seller sends a request for payment to the buyer, the buyer approves the payment, and the bank sends the funds. The push versus pull is the biggest shift. RTP eliminates the friction of the buyer initiating the transaction and getting it approved on the bank side. That’s been the major obstacle to date. ~ Jed Rice, CEO, Aliaswire
Canadians caught digital wave as merchants push for more affordable, govt- inclusive solutions
COVID-19 accelerated Canadians’ payment preferences towards digital, showcasing the need for payment providers and the government to keep pace. As bricks and mortar retailers faced capacity limits and closures, Canadian businesses and consumers turned to e-commerce. While credit cards are popular, not everyone wants to use them, nor does everyone have access to them. That makes online shopping a challenge, given credit cards are the primary payment option for e-commerce in Canada. Our newest alternative digital solution currently in development will support Canadians’ seismic shift towards online shopping while expanding and providing more payments choice to consumers.
Canadians demonstrated their trust in Interac through its predominant use in-store and the thriving Interac e-Transfer service for peer-to-peer payments. Looking ahead, a new payment solution will be needed to not only drive down the cost of payments for merchants and retailers, but recent research by Payment Source indicates paying via Interac – direct from the consumer’s bank account – will give more Canadians access to online shopping and help them manage their finances. 55% of Canadians have abandoned a shopping cart because of the payment experience, a percentage that climbs to 60% among those uncomfortable sharing their credit card details online. These are central aspects of financial inclusion and literacy.
As brick-and-mortar retailers faced capacity limits and closures amidst the pandemic, Canadian businesses transformed by investing in e-commerce sales platforms to stay afloat. Merchants were faced with higher costs to shift to/add online payments capabilities. Pre-pandemic, brick-and-mortar storefronts could accept multiple methods of payment, but online, Canadians are primarily given a credit card option. As a result, these online merchants are now demanding more affordable and financially inclusive options to help connect everyone in the community to the online shopping experience while still balancing costs. ~ Robert Hyde, CEO, Payment Source
Will US consumers finally open their digital wallets?
Digital wallets quickly have become the dominant payment method in the APAC region and parts of Latin America, but we’ve yet to see digital wallets, such as pass-through, e-wallets and mobile wallets, gain significant ground in North America. With that being said, the growth of e-commerce in 2021 did increase adoption of digital wallets slightly in North America this past year.
PPRO research found that while only 22% of North American consumers in 2019 utilized digital wallets, 27% of consumers today use methods like Apple Pay and Venmo. In 2022, driven by mobile shopping experiences and the penetration of mobile throughout North America, we’ll see more US consumers leaning on the easy & convenient experience of digital wallets as their main form of payment.
We’ll also see a drive towards digital wallets from retailers next year — especially those looking at markets outside the United States. With rising fees from major credit card providers, moving towards alternative payment methods like digital wallets can be a way for retailers to keep costs low while providing a seamless e-commerce experience for consumers. ~ Andrew Edem, Global Head of Innovation, PPRO
Digital accounts payable delivering faster payments, efficiency, savings
Most businesses are interested in converting more payments to electronic methods. Why not? It’s faster, easier, and less expensive to manage for everyone. Yet despite the obvious benefits, broad-scale adoption has stalled to date. I see businesses investing a lot more time, energy and technology in three areas to overcome this.
A finance team’s capacity to contact and onboard vendors to accept digital payments has been a huge obstacle to date. This can be addressed by solution vendors that offer services to continuously onboard suppliers to accept digital payments. Giving suppliers a choice in how they get paid is another simple, but important shift. It has to be a win-win for the buyer and the supplier. More buyers are starting to understand this.
Lastly, buyers have to make it easier for suppliers to manage and update their payment information in one place for multiple customers. Supplier portals can address this need while also providing suppliers with a consolidated view of their accounts receivables along with valuable analytics on things like efficiency, DSO and Credits Outstanding. ~ Vijay Ramnathan, President, MineralTree Inc
We live in interesting payment times
What worked just yesterday is not necessarily the solution for tomorrow in the payments industry. I see it daily in the new product announcements, fintech innovations, new fraud prevention solutions, fast moves in mobile commerce, BNPL that just won’t quit, and cross-border commerce that keeps growing.
I’m inspired by the amazing agility and determination among payment leaders and fintech innovators. Let’s anticipate the challenges ahead and plan for continued success in 2022. My sincere thanks and best holiday wishes to our contributors and their employees around the world.
~ Jeff Domansky, Managing Editor, PaymentsNEXT
Related PaymentsNEXT news:
Payment industry leader predictions for 2022 – Pt 1
2020 predictions: Global growth of e-commerce
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