Payments has always been defined by innovation, but the pandemic catalysed the evolution of digital markets, as opportunities for in-person experiences diminished. Optimisation of the customer experience is critical, as well as fostering long term economic resilience.
This pattern will only continue as we move into 2022, read on for our top predictions.
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SaaS Payments will dominate
The demand for new digital services will continue to serve as a catalyst for the adoption of payments SaaS. Cloud first will become the go to model for banking and payment organisations that put agility, cost efficiency and reduced time to market on their top priority list. Traditional banks will seek to outsource shared services and white labelling of omnichannel payments in-house like fraud prevention, payment gateway and reconciliation services.
Connected Economy Convergence
Forrester predicts that 2022 will be the year of convergence between edge, IoT and networking tech. New digital ecosystems will deliver greater value for participants (banks, consumers, businesses) using new generation channels. These digital ecosystems are supported by APIs which ease connection to third parties and help expand a financial institutions’ offering beyond banking and payment.
The rise of SoftPOS
Software point-of-sale or “tap-to-phone technology” (SoftPOS) is gaining momentum against traditional EFT/POS based services and it will continue into 2022.This is due to the rise in interest among SMEs around digitizing payments, especially for economically viable tools like mobile apps.
Open finance will disrupt alternative payments
This rise of account-to-account payment software, which blends payments and data, allowed a growing number of consumers, businesses and banks to process payments more cost-effectively than legacy payment methods like card payments. Real-time payments also improved the customer experience and payment security.
The rise of this and other alternative payments will continue and increase throughout 2022 - and the one to watch will be the QR (Quick Response) code. A 2021 Ivanti survey shows that 69% of Brits are open to using this payment method in the future, and the new year is likely to see more companies accepting payment via QR code.
Regulation may upset Buy Now, Pay Later
An Australian Securities and Investments Commission report showed that 21 per cent of BNPL users surveyed had missed a payment in the previous 12 months, and that of those who missed payments, over half used at least two BNPL providers.
This is an ongoing international concern, and regulators are starting to pay more attention. In the UK, the Labour MP Stella Creasy has called for urgent regulation to stop young consumers from taking on an insurmountable mountain of debt. As more people get into debt, regulators around the world are likely to start cracking down, especially alongside the rise in inflation.
More money than ever will be spent combatting Cybercrime
Cybercrime has risen 600% due to the COVID-19 pandemic. This encompasses theft, embezzlement, data hacking and more, forcing companies to move quickly in their response.
This has meant a demand for multi-layered real-time fraud solutions, which are only set to become more of a necessity in the new year. These solutions tend to leverage machine learning and AI to detect fraud. This type of system helps an organisation to react quickly to fraud innovations.
While there is still a long way to go before mass adoption, the future of crypto will get closer in 2022 - as digital currencies make their way to the top of the agenda for central banks. Central Bank Digital Currencies (CBDC) - the digital equivalent of a country’s fiat currency - will proliferate around the world and central banks will pilot them to find ways to lower the cost of cross border transactions and other services. There will also be other digital models and initiatives emerging - leading to a demand for regulation to improve efficiency and protect the consumer.
Consumers keep asking for super-apps that will allow them to centralise services and create one giant marketplace that is available in one app, offering multiple capabilities into a single mobile application - from mobile banking to ticketing. These super-apps will continue to emerge globally in 2022, and this will drive up demand for paytech that can provide seamless integration with other apps and an enhanced user experience -as multiple apps are aware of customer information such as location, buying preferences, and financial details.
Described as the future of financial services and payments, embedded finance is the merging of a non-financial service provider, with a financial service, such as payment processing, or lending to make it easy to pay with little friction from the customer through an app - like Uber or Starbucks. This is possible because embedded finance companies have disintermediated third-party banks and lenders and found a way to connect directly between themselves and the consumer.
The trend will continue to accelerate as the economic fallout of Covid-19 coupled with post-pandemic disruption will increase demand for value driven customer-centric banking. In order to meet this demand, banks will need to embrace Banking-as-a-Service platform models that use APIs to embed banking in everyday life. This will make services more accessible and inclusive for banking customers and will allow financial institutions to align their offerings with what the end user wants.
Adapted from Jane Loginova’s conversation with Global Banking and Finance Review.
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