Digital payments will evolve further this year as customer preferences are reinforced and geographic boundaries are blurred…
If 2022 was the year the world awoke from the pandemic, 2023 could be the hangover. Economic uncertainty is predicted worldwide and yet, the world of digital payments could be insulated from the turmoil as both businesses and customers look to maximise efficiencies and minimise costs.
In fact, the total transaction value of the digital payments segment in the UK is expected to increase by almost 18%
US$433.60bn
The forecasted transaction value of the UK’s digital payments segment in 2023.
While global economic instability may see some adopt a ‘back to basics’ approach to finances, it also stands to highlight the benefits of digital tools such as payments and banking more broadly. Some of the key trends powering this include:
“While the use of embedded finance has increased in recent times, the next few years will likely see adoption rise exponentially.”
KPMG, November 2022
Banking as a whole is being transformed. By embedding banking services into customers’ contexts and layering intelligent services on top of commoditised financial products, digital brands are fuelling a long-term restructuring of the industry.
Customer expectation for embedded finance is there – even if they’re not quite sure what it’s called – and finally, so is the fintech that allows it to function so seamlessly.
This fintech is more often than not Banking as a Service (BaaS). And there’s no need for corporates to develop BaaS themselves – partnering with a BaaS provider to embed finance into their customers’ journey drastically reduces the costs, time and resources associated with going it alone. It’s just one of the reasons experts say will contribute to the steep rise predicted in the adoption of BaaS this year – from businesses of all sizes.
64%
Of small- to medium-sized businesses are interested in embedding finance via BaaS.
This growth is expected to continue into 2024 and beyond. The Total Addressable Market (TAM) of Banking as a Service (BaaS) providers in the European Economic Area and the UK is estimated to reach between $90 billion and $105 billion by 2030, with mainstream BaaS adoption expected to come within the next 2 years.
Adoption depends on several factors, though, and continuing economic pressures faced by corporates will have a follow-on effect that will impact their choice of BaaS provider.
35%
Of corporates adopting embedded finance cite rapid implementation and a swift time to market as their main priorities in the BaaS journey.
It’s clear that BaaS providers utilising API technology that allows rapid deployment – such as the up-to-12-week turnaround offered by Techcap – as well as simple and singular integration will be most attractive to brands looking to embed finance in 2023.
Read more:
How Brands are Boosting Their Business with Embedded Finance
Established in 2017, Open Banking is finally set to step into prime time in consumer minds in 2023. Adoption will soar – there are already more than six million active users of open banking-powered apps, products and services in the UK alone – but faster growth could be seen this year if fintechs and banks win the trust and customer of a potentially massive customer base locally and globally.
24.4%
The expected compound annual growth rate of open banking from 2019 to 2026.
It’s clear that the key to this growth success relies on providers offering such high levels of security and such an effective service that customers can’t help but be won over by open banking’s efficiency.
Read more:
How Open Banking is Opening Business Opportunities
Commerce is no longer limited by geographic borders – nor bound by traditional banking’s slow and cumbersome cross-border payment processing. A new wave of fintechs – including Techcap – is increasingly better able to serve consumers and corporates making global purchases thanks to cost-effective, borderless and almost-instant transactions that will become mainstream in 2023.
US$2.1trillion
The forecasted value of global cross-border e-commerce payments in 2023.
That’s 13 per cent higher than the US $1.9 trillion in 2022 and will account for 38 per cent of all e-commerce sales in 2023. Businesses will no longer rely on customers solely within a brand’s country borders – digital cross-border payments processed by fintechs means that the world literally is a brand’s oyster.
Read more:
How Digital Banking is Rising to the Challenge of Cross-Border Payments
This year is also set to see a rise in B2B cross-border payments as the emergence of cross-border fintech payment solutions allow businesses to integrate with their APIs to seamlessly connect accounting and other business IT systems. These fintech providers also increasingly provide B2B cross-border payment solutions not offered by traditional banks, such as automated mass-payment solutions and multi-currency accounts.
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