Top Payment Industry Trends to Look Forward to in 2023
The payments sector has seen a significant transformation over the past ten years. The process was accelerated by the COVID-19 pandemic, which also sped up the digital transformation in the banking industry. It is interesting to note that this trend is expected to continue for a while.
In this post, we will take you through the major changes that might have an impact on several payment-related aspects of customer experience and business development in 2023. We hope that this information will help you create a successful plan for the new year.
Trend 1: Expanding Payment Options
The options for people to make payments are certain to expand in 2023. That is because many fintech companies, banks, retail businesses, and crowdfunding platforms will be investing a lot more money in modern technologies and innovative solutions to satisfy their customers. They will be offering them flexible choices ranging from contactless in-store payment methods to various online options.
The new digital payment methods that more merchants will accept in the coming months include pay-by-link, QR codes, email money transfers, virtual debit and credit cards, digital wallets and mobile wallets. Anticipated regulatory shifts in favour of digital currencies worldwide may encourage some merchants to start accepting payments by central bank digital currencies (CBDCs) and crypto cards.
Trend 2: Rising Instalment Payments (Buy Now, Pay Later)
Instalment payment plans, or “buy now, pay later” (BNPL) options, used to be offered by mostly in-store electronic retailers and furniture companies. But due to the rise of BNPL apps like Klarna and Clearpay and the growing preference of young consumers for the flexibility of modern instalment payments, many e-commerce merchants and brick-and-mortar stores now offer buy-now-pay-later options.
Sellers at online shopping sites like eBay and Amazon can now allow their customers to spread their payments for items purchased over days, weeks, or months, depending on the terms of the BNPL provider. Experts predict that more stores will offer this digital instalment payment plan in 2023.
Trend 3: B2B Payments Digitisation
Historically, business-to-consumer (B2C) payments have undergone faster digitisation than those made in business-to-business (B2B) transactions. However, in the coming months, experts predict that there will be a digital transformation of the business-to-business (B2B) payments market globally. This shift will be driven by the need to meet the new expectations of suppliers and vendors since the start of efforts to recover from the supply chain disruptions caused by the COVID-19 pandemic.
As B2B payment gets more digitised in 2023, a common manual practice like the writing of paper cheques is expected to be replaced by digital methods like sharing payment links and QR codes. Reducing manual processes through the digitising of invoices, vendor payments, accounts payable, accounts receivable, expense reimbursement, and other B2B transactions enables businesses to significantly minimise operating costs—saving both money and time.
Trend 4: More Cross-border Payments
The future of international money transfers looks more promising in 2023, as many fintech startups are introducing new solutions for cross-border payments post-pandemic. Leading services like TransferGo, Paysend, TorFX, Wise, and WorldRemit charge lower fees than banks and traditional money transfer providers. They also provide safer automated processes, faster transactions, lower exchange rates, more secure multi-currency accounts, and better API integrations. Besides, most of them offer a variety of payment cards with attractive interest rates and perks for frequent travellers like digital nomads and freelancers.
The availability of cheaper ways to send money domestically and internationally today is encouraging many individuals and businesses to transfer funds. They can now easily wire money to countries in Europe, America, Asia, Africa, and other regions of the world. Examples of popular destinations for cross-border transfers are the United States, the United Kingdom, Ukraine, Germany, Nigeria, China, Bangladesh, India, France, and the Philippines. The purposes of remittances are to finance family or business projects, payroll, education, food needs, housing, healthcare, and security, among several others.
Sergey Romanov, Chief Product Officer at Profee believes that in addition to traditional cross-border payment methods like bank cards and wire transfers, it is essential to give users locally used payment options such as German Sofort or the Dutch iDEAL. And even though it does not offer the fastest delivery of funds, it provides customers the comfort of using their most trusted payment method.
Trend 5: Intensification of Cybersecurity
Today, customers feel more at ease than ever when making purchases online, thanks to the popularity of mobile payments. On the other hand, companies have been plagued with payment scams and cyber fraud while providing this level of comfort for customers.
According to a 2020 report by Argus Research, cybersecurity losses might reach $10.5 trillion by 2025. A 2021 publication by market research company Nilson Report, highlights chargebacks as a major issue, where fraud is predicted to cost the debit and credit card industries more than $400 billion in damages over the next ten years. Based on these predictions, e-commerce companies and all types of businesses that accept credit cards need to know how to prevent chargebacks.
In 2023, more emphasis on cybersecurity in payments will continue to be driven by the expansion of e-commerce, non-cash payments, and an increase in cyber threats.
Trend 6: Increasing Use of Artificial Intelligence (AI)
As everything from smartphones, automobiles, wearable devices like smartwatches, messaging apps (chatbots), and online customer service portals now use artificial intelligence (AI) technology, it is becoming more and more commonplace. The payments industry was not left behind in this trend, as many payment systems now incorporate AI.
Today, merchants benefit from the use of AI to increase sales volume and revenue. They are using it to eradicate false declines of legitimate transactions, prevent fraud (especially credit card fraud), reduce downtime, enhance customer support, improve the user experience, and increase data and payment security.
According to Statista, the global market for AI is worth US$328 billion, but only 25% of businesses use AI-powered systems in their operations as of 2022. In 2020, about US$11 billion was said to have been spent on AI-powered systems operated by financial service providers. This amount is expected to increase by more than threefold as more payment service providers are expected to invest in AI in 2023. Besides, more than 90% of top companies intend to spend more money on incorporating AI into their business processes in the coming months.
Another noteworthy factor that will contribute to an increase in the use of AI in payments is the development of big data analytics. For businesses to get better insight from the massive amount of data that they can collect online about their customers’ payment preferences and experiences, they will need more powerful AI-enabled systems. In particular, they would have to use software that can smartly process structured and unstructured data scraped from multiple open data sources, which include social media posts, user reviews, and comments.
In the coming years, the focus of AI applications in payments is expected to be on smarter innovation decision-making using highly automated systems, natural language processing (NLP), human speech processing, data mining, text analytics, and deep learning.
Trend 7: Acceleration of Engaging Commerce
The digital-first economy is speeding up "connecting commerce" in many industries. Companies now engage their customers at all stages of the lifecycle of every product. The overall customer experience is being improved through online check-in, automated communications, online appointments, digital marketing, and loyalty programmes with various levels of privileged attention.
In 2023, more businesses will try to provide a connected experience for their customers. Their goals in implementing an engaging digital commerce strategy would be to add value, attract new customers, and grow their brands.
Trend 8: Launching of More Financial Super Apps
From social interactions to bank transactions, more and more facets of people's lives rely on smartphones nowadays. This development is driving the installation of many applications on mobile devices. But instead of having to consume so much space downloading several mobile apps for different purposes, “super apps" were introduced to the market to enable consumers to combine many functions in an all-in-one tool.
According to the current trend, payment services are often included in multi-app environments. One such is the well-known Chinese mega app WeChat, which began as a messaging service but has expanded to provide other services like taxi rides, hotel reservations, medical consultations, games, virtual wallets, and a lot more.
In the payments sector, there is also an increasing number of financial super apps. A leading example of them is Revolut, which can be used for many purposes, including banking with checking and savings accounts, payment processing, foreign exchange, international money transfer, payment card branding, crypto trading, personal budgeting, and cash flow statement preparation. More super apps with cutting-edge payment solutions are likely to emerge in 2023.
Trend 9: Development of Payments in the Metaverse
Our lives are starting to be gradually changed by virtual and augmented reality. Furthermore, as the lines between the physical and digital worlds blur, more and more immersive experiences emerge.
It is disputed if metaverse technologies have reached their major milestone, but everyone seems to agree that they are here to stay. Therefore, in 2023, all people concerned about the payments industry should anticipate experiencing the growth of financial transactions in the metaverse. There were even noteworthy advancements in banking in the metaverse in 2022, with banks like JPMorgan Chase, American Express, and HSBC taking the lead.
The metaverse has enormous ramifications for the future of financial technology and payments since it might enable a digital economy and support millions of global entrepreneurs.
Trend 10: More Partnerships Between Major Industry Players
Partnerships between well-known fintech companies, banks, payment processors, and payment service providers will multiply in 2023. The payment services industry will be substantially transformed by these collaborations, as industry players will be sharing expertise, infrastructure, technology, and risks. They will build synergy and create better and more flexible solutions to meet the needs of a dynamic market.
In 2023, customers should expect tested, tech-enabled, and AI-powered payment solutions from newly formed partnerships. The collaborations between major players will lead to the launching of new fintech startups and the providers of technology-based solutions like banking-as-a-service (BaaS), payment-as-a-service (PaaS), and software-as-a-service (SaaS).
Trend 11: New Payments Regulations
The coming changes in the payments industry will not be without adverse effects. Every type of transformation has benefits and drawbacks. Therefore, consumers and merchants should expect new rules from regulatory agencies like central banks, the Financial Conduct Authority (FCA) in the UK, the Prudential Regulation Authority (PRA) in the UK, and the Consumer Financial Protection Bureau (CFPB) in the United States.
In the UK, there is a report that a new proposed bill is likely to make it much harder to advertise cryptocurrency if passed into law. In Europe, the EU is preparing to regulate the metaverse in 2023. Those were a few examples of new regulations coming in the new year. We cannot look into or tell exactly what the new rules will be in different parts of the world. All in all, everyone should be ready for an interesting payments sector transformation in 2023.
Global payment trends indicate that technology will change the way transactions are made in 2023 and beyond. Technological investments will be directed towards increasing the security of online products and services, simplifying the purchasing process at e-commerce sites and brick-and-mortar stores, and providing customers with more innovative and convenient payment options.
Customers will need financial super apps and a variety of payment methods from businesses in 2023. The most desired options will include payment links, email money transfers, BNPL solutions, digital currencies, and cryptocurrencies (and crypto cards).
On the other hand, merchants should concentrate on providing omnichannel commerce for a seamless shopping experience both online and offline, B2B payment digitization, exploration of the metaverse, better cybersecurity, the adoption of AI-based systems, and better customer engagement. In this regard, industry players should be open to creating more partnerships between banks, fintech companies, and payment processors.