The COVID-19 pandemic has significantly accelerated the volume and value of digital payments, and in 2022 we will see the next phase of digital payments as alternative payment methods become the norm. Buy Now, Pay Later (BNPL), Digital Wallets and Account-to-Account (A2A) payments will continue to eat a share of traditional payment methods such as card and cash thanks largely to new real-time payment bars that are activated and accrual and the open banking infrastructure that It lays the foundations for changing the behavior of payments.
RTP Infrastructure Enables Next Level Payments to Appear in 2022
Real-time payments have long been seen as a game-changing tool for payment services, but the implementation of ISO 20022, open bank accrual, and the regulatory engine will see payment services such as Request for Payment (R2P), Variable Recurring Payments (VRP), and A2A payments grow familiar. To the consumer in 2022. The demand for instant payments is growing from a consumer and business perspective, with real-time settlement expected to occur, which is reflected in more and more mid- to low-end banks deploying payment centers to access real-time payment bars.
Globally, real-time payment bars continue to gain momentum: Brazil’s PIX network processed more than 1 billion transactions during its first year of operation and accounted for 78% of bank transfers nationwide within the first two months of its launch. Nordic’s P27 network is expected to be operational in 2022, followed by US FedNow soon in early 2023. Use cases built on payment rails are expanding in real time, according to an Omdia survey with payment issuers/acquisitioners, with nearly 40% Respondents considered it a top priority for retail payments, with A2A, R2P and VRP payments seen as having the highest adoption potential for consumers and merchants.
Alternative payments are turning into the mainstream
Traditional payments are becoming increasingly less important to tech executives: Less than a quarter of Omdia survey respondents chose traditional payments in the top three IT projects, while a third of respondents chose alternative payments as a top priority. Similarly, spending on technology in alternative payments is expected to significantly outpace traditional payments over the next 18 months as issuers and buyers adjust to the unprecedented demand for digital payments.
Merchants are actively adopting alternative payments through A2A payments, digital wallets, buy now, and pay later increasingly alongside card networks and traditional Automated Clearinghouse (ACH) payments at checkout. Some merchants are seeking to restrict some traditional payments: Amazon has announced that it will no longer accept Visa credit cards in the UK from 2022 in response to an exchange fee rise from 0.3% to 1.5% after the UK leaves the European Union. Open bank payments, such as A2A, are likely to benefit in 2022 from higher card payment processing costs, and other merchants may follow Amazon’s initiative.
The payments industry has also realized that cryptocurrency is much more than a fad or meme, 2021 was the year of the hack. Bitcoin has reached all-time highs multiple times, almost all established companies are starting to recognize cryptocurrency as more than a fad or meme, and every tech company is hiring a crypto team from Twitter to Bumble. Now, governments are getting involved in crypto as well, by exploring the central bank digital currency, also known as a CBDC. China is expected to officially unveil its CBDC digital currency – the digital yuan – during the Winter Olympics in early 2022, and the Meta Diem project is also slated to launch in 2022 and will accelerate the widespread adoption of the cryptocurrency.
Included payments are the new expectation at checkout
Buy Now, Pay Later (BNPL) has redefined the relationship consumers have with credit as they make financial decisions at checkout. BNPL Bank threatens traditional credit card payment models and forces banks to either launch their own BNPL service or partner with an existing provider to maintain a direct relationship with their customers. Nearly half of the merchants surveyed by Omdia stated that the biggest improvement to reduce friction in digital payments would be better integration with their payment gateway. This can be achieved by including payments in the checkout journey on a global scale, similar to the user experience expected when ordering through Uber or Deliveroo. Inclusion of payment is not only about ensuring a seamless user experience, but also about harnessing customer data to provide the consumer with relevant and personalized financing options at the point of purchase to reduce friction.
In 2022, Embedded Payments will be rolled out at the merchant level and you expect the likes of Amazon, Walmart and Starbucks to reward loyalty with favorable payment terms at checkout, reducing retailer processing costs while ensuring a frictionless buying journey.