The world of digital payments is constantly evolving, and businesses need to stay up-to-date on the latest trends if they want to remain competitive.
A recent study found that more than 2.14 billion people shopped online in 2021, which is expected to continue to grow in the years to come.
As fintech continues to evolve, this article looks at ten trends to watch in digital payments. So, without further ado, let’s get started!
5) Cross-border payments
When people and businesses expand across borders, the need for quick, cost-effective cross-border payments increases, according to the Bank of England; cross-border payments are expected to grow to US$250tr per year by 2027.
“Cross-border payments are ripe for reform. When working with traditional corporate banks, opening an international bank account is a difficult, long and painful process – and the transactions themselves can add further days. Businesses are also losing out on cost,” said Laurent Descout, Founder and CEO at Neo. “With cross-border payments, many banks don’t just charge the exchange rate and the FX margin; they also inflate the overall price.”
“Instead, fintechs are enabling businesses to set up their own international account with a multi-currency IBAN in their organisation’s name. As a result, they can manage corporate cash flows and view trading history, market data and statics, all in one place. Virtual wallets then ease the process of making same-day payments. Businesses can use them to organise funds and store multiple currencies, ready for executing rapid payments or a currency exchange.”
As cross-border payments continue to grow in popularity, businesses will need to find quicker and more cost-effective solutions. Fintech companies that can offer innovative solutions will likely be in high demand.
Neobanks are a relatively new phenomenon, and they’re quickly gaining in popularity. These banks offer an online-only experience, and they typically have lower fees than traditional banks.
For example, in Brazil, NuBank has risen to become the country’s most valuable bank, with a market capitalisation of $37.15bn. And in the UK, Monzo has managed to accumulate over five million customers in a little over seven years.
“In the competition for market share between incumbent banks and neobank start-ups, incumbents should emulate their younger, more agile rivals. They must prioritise digital – in particular mobile,” added Abdul Naushad, President and CEO of Buckzy Payments. “At the moment, many incumbents spend their money in the wrong way, on large, multi-year IT projects that eventually lead to the launch of new services. But this approach takes too long and is too expensive.”
“Incumbents should also take on board the idea, ‘don’t make perfect the enemy of good’. By this we mean that rather than delay the launch of a new product or service because it’s not complete, banks should not be afraid to launch it anyway, but then be prepared to make small incremental changes, updates, and improvements on an ongoing basis.”
As neobanks continue to grow in popularity, traditional banks will need to find ways to compete. This rivalry could mean offering lower fees or becoming more innovative with their products and services.
3) Smartphone Payment Terminals
Apple made headlines in 2021 when it announced it would start accepting payments using the iPhone. This innovation was a major turning point for mobile payments, as it showed that businesses were willing to use their smartphones to take payments.
According to Ralf Gladis, the founder and CEO at Computop, “The ubiquity of the smartphone means that the more functional it is, the more people will use it in every scenario, as this latest move by Apple demonstrates. Customers use their phones to pay, so it makes sense for retailers to also accept payment using their Apple device – it’s the next logical step in payment evolution.”
“We believe that three scenarios will develop out of this. Firstly, smaller retailers will use the smartphone or tablet method of accepting payment for everything and will no longer need a traditional POS or cash till system; secondly, larger retailers will continue to use the POS but will send the signal from the system directly to the customer’s smartphone via NFC; and thirdly, cash on eCommerce deliveries will fade out to be replaced by digital payments. App-based retail solutions and digitally-enabled payments are the predominant direction of travel.”
Accepting payments using mobile devices allows businesses to stay ahead of the competition without investing in new technology – they can use the technologies that most of them already have.
The adoption of cryptocurrencies continues to grow, with more and more businesses starting to accept them as payment. This trend is likely to continue in the years ahead as more people become familiar with cryptocurrencies and their benefits.
According to Menda Sims, Chief Payments Officer of Stax, “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 organisations 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 this year.”
“For example, regulations from payment providers and the federal government are severely limiting digital payments in the Marijuana industry, and primarily cash-based businesses like these could see growth by opening up the space to crypto payments. 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.”
Cryptocurrencies are a fast, secure, and efficient way to pay for goods and services. As adoption continues to grow, businesses that start accepting them now will likely be well-positioned for the future.
New concepts of credit lending such as buy now pay later (BNPL) have been rising in recent years. This trend is likely to continue as more people become familiar with such services and their benefits.
“We’re increasingly seeing payment products getting combined with credit instruments at the point of sale,” said Renaud Laplanche, Co-Founder and CEO of Upgrade. “Innovation in credit cards, BNPL, and hybrid products like Upgrade Card are contributing to enhance the online, mobile and in-store shopping experience.”
Hybrid forms of credit-lending is an excellent development for both consumers and merchants. Consumers can spread their payments over time, improving their cash flow, while merchants get paid sooner and have a lower risk of bad debt.
The integration of credit-lending services into the payment process is likely to become even more common in the years to come.
The bottom line
As the payment vertical evolves, businesses need to stay ahead of the curve and be aware of the latest trends. Digital payments will not only continue to grow but will also become more sophisticated.
Fintech businesses that are up to speed with the latest trends and adapt their payment processes accordingly will most likely be the best positioned for the future.