Payments predictions: 2022 will be a 'transformative year' for embedded finance

"Those that don’t offer a frictionless payment won’t remain competitive and will see significant customer conversion fallout”

by | December 10, 2021 | bobsguide

The new year will be “transformative” for embedded finance, according to Dimitar Dimitrov, director of technology at OpenPayd.

According to a growing consensus, customer trends for digital-first payments will drive competition in the market and see retailers, banks and card networks emerge with new products to meet the growing expectation of certain payment options.

“The pandemic put consumers’ need for convenience and simplicity into sharper focus for the millions who couldn’t make payments in person. This ‘digital confinement’ fundamentally changed the way consumers use digital services, and the functionality they expect from those services.

In fact, 54 percent of European business leaders said they would explore embedded finance in the next year, focusing on embedded payments, according to a report by OpenPayd.

“I’d expect to see businesses sharply increase their investments and partnerships as they find a role for embedded payment services in their customer journeys,” Dimitrov added.

Similarly, Vicki Gladstone, CEO at Moorwand, said customer trends will accelerate the value of the embedded finance market.

“Retail-focused ‘Buy Now, Pay Later (BNPL)’ propositions will help open the door to more growth for the sector as a whole, which is predicted to be worth €720.78bn over the next five years to European companies alone.

“Companies will gain confidence in the technology, and we will see more and more opportunities to utilise embedded finance offerings, in diverse places, from car showrooms to cosmetic surgery clinics.

“Digital environments are traditionally associated with lower overheads, so these hero offerings are likely to be built with online payments and embedded finance in mind.”

Moreover, Brian Coburn, CEO at Br-dge, said the growth of the BNPL market will raise competition for existing players to explore new payment solutions.

“In anticipation of the growth in opportunity some banks and card networks are making their solution more digitally accessible to compete with the latest market innovators, such as Klarna and Clearpay.”

In September, both Mastercard and Monzo launched their own BNPL offering to meet the growing demand for flexible and digital-first payment options at checkout.

“The challenge for those looking to adopt upcoming payment methods and quickly evolve with customer demand is the speed of innovation and integration, which is where payment orchestration really adds value,” added Coburn.

James Booth, VP head of partnerships at PPRO, said pressure is growing for retailers to offer customers preferred method of payment, otherwise they face a high risk of basket abandonment rates when expanding into new markets.

Moreover, Alex Reddish, managing director at Tribe Payments, said mobile payments will become a global standard.

“As a result, I expect competition will not just be between international card providers and cash, but also with new payment methods and digital wallets. Those that don’t offer a frictionless payment as an option won’t remain competitive and will see significant customer conversion fallout.”

Reddish added the new year could see “firmer plans for regulating the BNPL market” following the explosive growth of the payment option in the UK.

A boost for global real-time payments

Meanwhile, real-time transactions surged in 2020 to 70.3bn, up 41 percent from 50bn in 2019, revealed a report from ACI Worldwide. The popularity of real-time payments will continue to grow in the b2b market.

Silvia Mensdorff-Pouilly, SVP of banking and payments at FIS, said the new year will see “more businesses leveraging real-time payments to better manage liquidity and risk, along with services such as request to pay, account aliases, P2P, payee confirmation and payments at POS”.

“These have now become standard in almost all countries, with an increasing number moving toward API-based interfaces and ISO messaging to ease access.”

Tribe Payment’s Reddish added, “the appetite for easy, fast transactions [will] transfer over into remittance with real-time payments set to go global”.

“Cross-border payments have been notoriously slow over the years but through CBDCs and things like the European Payments Initiative, there will be a continued growth in real-time payments as those same merchants and consumers that deliver frictionless payment experiences expect frictionless settlement.”

Moreover, Abdeslam Alaoui Smaili, CEO of HPS, said, “as the amount of money exchanged digitally between businesses continues to increase, so will the need for interoperability and we should expect to see significant adoption in the next 12 months.”

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