Top Five Payment & Commerce Predictions for 2023

We’ve all heard the references that the Covid19 pandemic has delivered six years of digital transformation in six months.

Businesses were forced overnight to support employees working virtually, local enterprises had to figure out e-commerce home delivery solutions in days and consumers were hesitant to touch physical cash or payment terminals for fear of transferring the virus.

For the first time ever, Chinese consumers bought more on-line than they did in store. Many other countries are catching up, with new shopping habits such as on-line food ordering sticking with consumers trying them for the first time.

Technology and Software as a Service (SaaS) businesses supporting the internet economy have surged in value as they have become critical infrastructure to support virtual meetings, on-line commerce and the stay-at-home economy.

Payments and e-commerce really have changed forever and bankers, company treasurers, entrepreneurs and individuals all need to be across the emerging payments trends as we move through 2021 and beyond.

Some key evolving payment and e-Commerce themes are: –

Mark Personalised Toblerone – Kingfisher Cards & Gifts

1. Direct to Consumer (D2C)

Direct to Consumer (D2C) – many big consumer brands and manufacturers are now starting to sell Direct to Consumer (D2C). From personalised Toblerone Chocolate bars, Heinz Baked Beans bundles, Harpic Washing Powder and Dyson Vacuum cleaners.

As James Dyson CEO of British Manufacturer Dyson puts it, “we are asking people to buy direct from the maker, because why would you buy from an e-tailer, an Amazon when you can buy from the manufacturer and have a direct relationship with the manufacturer?”

Obviously owning the D2C customer relationship has numerous benefits, not least increased operating margins, owning the transactional data and building demographic profiles of future customers.

As we move through 2023 expect to see many more manufacturers selling direct and cutting out the distributor or retailer.

2. Payments Competition

With contactless and mobile payments exploding during the pandemic as consumers became weary of touching physical cash, additional forms of payment have started to become mainstream. 

A surge in debit card use, particularly amongst younger millennials has seen the rates of credit card use start to meaningfully drop for the first time.

Buy Now Pay Later (BNPL) is also increasingly popular as many young consumers, do buy now and pay later.

With a well-designed user experience and the instant gratification consumer experience (I can buy that handbag or pair of designer jeans I really like, even if I can’t quite afford them right now), BNPL has proved there is a strong product market fit that is gaining consumer adoption fast.

Unlike the banking industry, BNPL is generally lightly regulated and not viewed as a form of credit provision. 

As BNPL users and revenues expand, it will be very interesting to see what future regulation does to this niche financial services sector and its ever-growing range of market participants offering similar services.

3. User Experience

User Experience – Providing frictionless, friendly and fast payment experiences will become the focus as more companies enter the financial services and payments industry. Design thinking will become critical as more applications and companies seek to deliver payment experiences similar to Uber. Yes, you’re right, it’s so frictionless you don’t even notice it.

Competition for the relationship with the end customer will heat up and companies will aggressively pursue the ‘pane of glass’ role, where everybody wants to be the main window promoting goods and services to the customer. 

With many businesses wanting to be a tech business and own the customer relationship, the next two years will really start to sort the enterprises able to adapt to truly digital models and those who can’t. 

Moving forward there are likely to be four or five go to applications that each consumer relies on for their core commerce and lifestyle needs.

4. Increased Regulation

Increased Regulation – Regulators will continue to drive more innovation and competition in banking and payments. 

Pressure will build on dominant players, including credit card scheme pricing and competition will be encouraged through authorised data sharing. Faster and cheaper real time domestic and international payments will also be encouraged by regulators. With a near doubling of global cross border payment flows towards $250 trillion, driven by the internet economy and cross border commerce, the need for more transparent, faster and lower cost payment methods will accelerate. 

SWIFT the global cooperative of banks is already overhauling its global infrastructure to compete with new competitors to enable near instant real time cross border payments.

Open Banking will also become more understood by mainstream customers as regulators force more competition in the banking sector. Individuals and businesses will start to better understand how their existing financial data can be used to benefit them in the form of better offers and more appropriate financial solutions. This will only be the start of the open data economy as data sharing moves into utilities, telecommunications and other industries.

5. Big Tech Collaboration

Big Tech Collaboration – With Big Tech companies often a big supplier to major financial services companies in the form of Cloud infrastructure (Amazon AWS, Alibaba Cloud, Google Cloud) advertising (Facebook, Google and Amazon) and virtual meetings (Microsoft and Zoom) collaboration is likely to continue between Big Tech and Big Banking.

Big Tech will also continue to set the bar for customer experience, user design and management of data, forcing banks and financial services providers to continually improve. 

Big Tech will continue to collaborate and partner with banks as seen by the collaboration between Apple, Goldman Sachs and Mastercard on the new Apple credit card. 

Many companies, including banks and the big technology players will realise no one can do it all alone and a more collaborative financial ecosystem is likely to develop.  

With customers demanding a frictionless, fraud less and forfended journey, where payments are near instant, safe and secure, regulators themselves will be under more pressure to manage a financial ecosystem moving faster and innovating quicker than ever before.

As we move through 2021 the payments industry will become more competitive and more fragmented.

The boundaries between on-line and off line commerce will continue to blur. If you make a purchase in store on an app, is that on line or off line?

Retailers and indeed all businesses will have to carefully assess which forms of payment to actually accept. 

There will be a need to grapple with the complexities of supporting more and more different types of payments. 

Corporate Treasurers and Finance Managers will have to expand their knowledge outside of debt, cashflow forecasting and liquidity & foreign exchange management to ensure they have visibility, control and instant reconciliation over more forms of payment. 

And banks and bankers will have to develop or partner to offer a fuller ever evolving suite of receivables capabilities to support corporates dealing with an ever more demanding customer.

With a growth surge driven by massive pend up demand just around the corner, from people wishing to travel, socialise and undertake many of the activities we all took for granted before Covid arrived, now is the time to get your financial services business and sales force ready for the post Covid economy. 

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