The sound of tills ringing is set to be relegated to pre-pandemic history. There’s a digital payment revolution underway and it’s good news for retailers. While paying with cash has been found to cause consumers physical pain, a new era of seamless digital payments mean a fast, friction-free experience for shoppers… and ultimately, healthier profits …
The sound of tills ringing has been relegated to pre-pandemic history. There’s a digital payment revolution underway and it’s good news for retailers. While paying with cash has been found to cause consumers physical pain, a new era of seamless digital payments mean a fast, friction-free experience for shoppers… and ultimately, healthier profits for merchants.
The scramble to digitise amidst the recent boom in e-commerce has taught us valuable lessons, though. Staying ahead of changing consumer preferences is key to capturing and maintaining market share. With that in mind, here are five key trends in payments that merchants should keep sight of in 2022.
There’s no doubt that COVID-19 changed consumer behaviour. What and where purchases are made has evolving dramatically, and so has how they’re paid for. Potential virus transmission drove consumers to tap and go at higher levels than ever before in 2020 and today, nearly 70% of debit card transactions are contactless, as ‘tap and go’ payments hit record highs.
Around 415 contactless transactions took place every second last year, with around 13.1 billion contactless payments being made in 2021, according to the latest data from UK Finance, which represents banks.
Millennials were already heavy contactless users pre-Pandemic. Now, other groups, including Baby Boomers, have joined them, with usage across all generations expected to grow further.
Beyond card-originated contactless payments though, the next biggest contactless trend is…
In China, the majority of payments are already completed via QR code, and it seems like the rest of the world is finally due to catch up. If 2021 was the year of QR adoption, 2022 will see its boom.
A recent study of consumers in Europe and the U.K. found that more than half of all respondents also said they expected to use QR codes for payments in the near future. And that ‘near future’ is practically already here.
While 80% of smartphone users said they had scanned a QR code at least once in their lifetime, 40% added that they scanned one in the last seven days.
Even street artists are getting in on the act. The high-tech barcodes are popping up on murals, encouraging art-lovers to donate. Once they scan the QR code, they’re taken to the artist’s payment gateway.
As well as the ease and convenience of QR code payment, there are benefits in its low costs, too. No sector feels the pinch of cashless transactions more than SMEs. Investing in the necessary buying terminals can prove seriously costly. QR codes don’t require any specific software or equipment – any iPhone or Android smartphone can scan them directly from the main camera app.
In practice, QR code payments can work several ways. A consumer can scan a seller’s QR code when paying in person. Conversely, a merchant can scan a QR code on a customer’s payment app to process a payment. Either way, cards and cash don’t get a look in.
Messaging platforms that enable e-commerce is a bandwagon markets like the UK and Europe are jumping onto in 2022. According to a study by Juniper Research, the key to sustaining growth in messenger app users is integrated payment services. Especially post-COVID-19.
It forecast that instant messaging app developers will partner with payment gateways to offer payment capabilities in apps and increase the overall value proposition. It seems an easy sell – the ability to quickly and conveniently make payments without leaving an app. But having a user’s personal and financial information in one place can raise privacy concerns.
While apps like WeChat, iMessage and WhatsApp link payment functionality with a users bank account, others lean on encryption and cryptocurrency to maximise security.
Signal, the private messaging app that had a 4,200% increase in downloads in January 2021, has launched a payments feature for its UK users. Thanks to a partnership with MobileCoin, the function is a type of digital cash designed with strict privacy protocols.
Messaging app Viber launched its Payments service across Greece and Germany last month. The service is a digital wallet for payments and transfers and is expected to be launched across wider Europe and the UK this year and next.
It has been called the ‘future of finance’ and with the demand for integrated digital services soaring, it’s not hard to see why.
Embedded finance is when a non-financial service provider – a retailer or a ride-share like Uber, for instance – partners with a financial service provider.
The result is embedded payment processing, lending, or insurance within software. A blurring of lines between finance and a non-finance service. And it ticks all the boxes of the types of seamless e-commerce experiences consumers want.
Market analysis from Lightyear Capital, a New York-based private equity firm, predicts embedded finance (including payments, lending, and insurance) will generate $230 billion in revenue by 2025, a 10-fold increase from $22.5 billion in 2020.
We know that the less friction there is during a transaction, the more likely the consumer is to complete it. Almost 70% of online shopping carts are abandoned. On mobile, that figure soars to more than 85%. The reasons for abandonment at the checkout stage range from a poor website experience (especially on mobile devices), to the friction created by not having saved payment information.
Simply needing to walk to another room to find a card to use as payment is enough to derail a transaction. Enter, embedded finance… If the payment information is available through the app, consumers are far more likely to follow through with the purchase. In short: embedded finance enables the type of quick, easy and convenient payment that makes consumers far more likely to purchase – time and time again.
It’s 2022. We can chat with someone online on the other side of the world as easily as if they were in the next room. Surely making as similarly global payment should be as simple…?
Not historically. But that’s set to change.
Cross-border payment flows are expected to reach US$156 trillion this year. It’s a market ripe for disruption, according to Ernst & Young.
“Traditionally, cross-border payments flow via the correspondent banking network (CBN) which most front-end providers use to settle the payment. But, in recent years, we’ve seen new back-end networks emerge to optimise cross-border payments and enable interoperability between payment methods and provide senders with more possibilities to reach the receiver.”
Pain-points long associated with cross-border payments can be solved. How? By replacing the payment chain (or at least part of it) with a dedicated cross-border and/or multicurrency (CBMC) payment system. Transparency, short settlement periods, low transaction costs and accessibility are all hallmarks of the new players offering agile borderless transactions.
Multi-currency payment systems have the potential to accelerate international B2C (and B2B) trade. Get ready for transactions as seamless as sending a message from your office in London to a colleague in Hamburg.
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