The Future of Money is Digital: Payment Trends for 2022
Over the past 12 months digital transformation has continued to accelerate across all sectors, and commerce has been no exception. Even as society begins to normalize, with restrictions lifting and offices reopening, habits adopted during the pandemic are sustained.
Online and offline, spending has been transformed. Businesses that were brick-and-mortar-only adapted as online shopping became the only viable option in lockdown. In physical stores, the value recognized in touchless payments boosted the continued growth of contactless payments. Digital progress typically expected over a number of years was squeezed into just a few months.
While uncertainty and unpredictability are now expected, one thing that is clear is that that the future of money is digital. The pandemic accelerated change, but we have seen a permanent behavior shift to digital that is set to last far beyond. This is being supported by several innovative emerging trends that are set to unlock the power of digital money, and further reshape our payments world, and commerce more broadly.
Here are some of the most interesting areas to watch in the payments space over 2022.
- Embedded Finance: Open innovation has made once complex and expensive banking infrastructure much more accessible, allowing any company to become a fintech, and create new financial products often with a better customer experience and at a lower cost. With evolving regulations, more and more merchants are exploring how financial services can complement their revenues, while a raft of new banking-as-a-service providers are helping create new use cases and revenue streams.
- Green payments: With last year’s COP26 meeting drawing vital attention to the climate emergency, consumer awareness and appetite for sustainable products has never been higher. Research shows 62% of consumers would stay with their bank if sustainable benefits were available, yet only a quarter of consumers have sustainability features today. New solutions, such as Visa Eco Benefits, can help integrate features into card payments, helping users to understand the impact of their spending on the environment, with transactions offering donations towards eco-friendly and carbon offset partners.
- The Metaverse: The Metaverse is creating a new shared space between different digital worlds, blending virtual and augmented reality. Whether it is Nike selling virtual sneakers, Ariane Grande’s concert in Fortnite or a replica of Florence’s Gucci Garden in Roblox, we are seeing a ‘third space’ of virtual economies allowing sales of virtual goods. While the Metaverse presents enormous opportunities and creates an entirely new sales platform, defining how to effectively serve new and emerging forms of commerce presents a big question for financial institutions and merchants alike.
- Buy Now Pay Later: Following another year of rising eCommerce adoption, consumer interest in instalment-based solutions has rapidly increased. Like credit cards, Buy Now Pay Later (BNPL) offers unsecured credit to consumers, but they differ in terms of accessibility as well as the placement of the service itself, at the checkout (either online or in physical stores). To be successful, fintech BNPL providers must carefully balance their cost of funds with their ability to assess credit risk, manage bad debt and cope with increasing regulation, while FIs need to focus on partners and solutions that can allow them to enable these purchases.
- Crypto goes mainstream: Another fast-growing 2021 trend that will become even more prominent this year is the integration of crypto into mainstream financial services. We increasingly see regulators outline the mechanisms that they are going to use to oversee crypto-related activities. Visa is playing a leading role in enabling this entry of crypto into mainstream financial services by working with our financial institutions to allow their clients to buy and hold crypto through digital custodians and enabling more than 60 partners to issue cards to their crypto customers to buy various goods and services.
- Open banking: While data is a key ingredient in a truly personalized offering of financial services, it is paramount that consumers can share sensitive information with third parties in a more secure manner. Through APIs, consumers can share information with trusted third parties, who in turn create innovative financial solutions. This enhances the scope for entirely new products and services – and revenue streams – for acquirers and fintechs, such as Solaris Bank, which handles the core infrastructure of banking services while allowing its clients to take care of front-end distribution.
As technology and consumer demand continues to disrupt markets and prompt new approaches by financial institutions, fintechs and merchants, it’s clear that 2022 will be another year of large-scale change. With further positive disruption across commerce and money movement, innovation will continue to thrive in an open environment, which will truly unlock the power and potential of digital money.