Embedded Payments: The Next Decade of Fintech Growth

More and more people are using their smart speakers and similar devices to make payments and send money with voice commands. Even in rural areas, more consumers are tapping their cards and phones at checkouts than ever before. Right now, Buy Now Pay Later is the fastest-growing eCommerce payment method in the world. «We did see in 2020, a decline in payments activity, but in the fourth quarter of 2020 we already saw that volume bouncing back,» Erika Baumann, an analyst at Aite, said. U.S. retail e-commerce sales picked up during the lockdown as more people shopped online. In 2020, $794.5 billion was spent through e-commerce channels, surging 32.4% annually over 2019.

CBDC) – the digital equivalent of a country’s fiat currency – will proliferate around the world and central banks will pilot them to find ways to lower the cost of cross border transactions and other services. There will also be other digital models and initiatives emerging – leading to a demand for regulation to improve efficiency and protect the consumer. Predicts that 2022 will be the year of convergence between edge, IoT and networking tech. The biggest change will see new digital ecosystems arise to deliver greater value for its participants using new generation channels. These digital ecosystems are underpinned by the use of APIs which ease connection to third parties and help expand financial institutions’ offerings beyond banking and payment.

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In fact, digital payments have raced ahead in the last decade, thanks to strides in radio-frequency identification , chips on cards and mobile apps. Slow-to-adopt verticals such as construction, manufacturing, wholesaler, and education are poised for payment transformation. Up until now, accessing the payment technology needed to embed features would require lengthy vendor-onboarding processes, addressing compliance concerns and navigating archaic technology of legacy infrastructure.

When finances were especially tight across the globe, consumers wanted access to their funds as soon as possible. With the rise of peer-to-peer payments , businesses also started expecting transfer to be more efficient and as quick as PayPal or CashApp transfers. There are many benefits for card issuers to offer digital cards and digital wallets. Greater security leads to higher usage, increasing the likelihood the cardholder will carry a credit card balance, according to Aite research. According to virology studies, the COVID-19 virus can survive on banknotes for up to 28 days, compelling consumers to pivot to digital payment channels to avoid contracting and spreading the virus. Established payment giants Visa, Mastercard and PayPal have also started offering BNPL services to meet evolving consumer demand.

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Goldman Sachs predicts $1T in global value will be unlocked over the next decade through modernizing B2B payments and financial systems. It follows that competition for their engagement with any one payment method is fiercer than ever. In 2022, I expect to see the rise of super-apps driven by payment https://globalcloudteam.com/ methods such as digital wallets and “buy now, pay later” as a result. With a focus on full flexibility, these super-apps won’t just be payment methods, but full-blown lifestyle apps. As the pandemic changed everything about daily life in the past year, merchants learned to pivot quickly.

They can also free up their cash by paying suppliers with a credit card and extending a bill’s due date. Small and mid-sized businesses need all the help they can get from smarter solutions that reduce friction, remove guesswork, and automate tasks for business owners. The enablement of smart payment solutions delivered through simple and efficient APIs allows every provider (ecommerce, accounting, payroll, etc.) to offer these payment capabilities to their SMB customers, seamlessly. The COVID-19 pandemic has shone a light on the need for digital payments, and the industry is preparing for an oncoming wave of immense growth in the next decade. Looking at 2022, I believe digital transformation will play out in ways familiar and new for brands and consumers.

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The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. Highly scalable and quick to market, banks, credit unions and neobanks remain focused on UI/UX, benefiting from new cloud-based mobile deposit solutions that reduce cost and IT overhead. According to AT Kearney, Visa and Mastercard, digital payments will reach about 50% of contactless penetration by 2021.

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• For instance, the Pix network in Brazil accounted for 78% of nationwide bank transfers within the first two months from its launch.
• Data prowess and enhanced payment processing capabilities are inevitable to thrive ahead.
• If you’d like to talk through the future payments landscape, reach out to Sulabh.
• The biggest change will see new digital ecosystems arise to deliver greater value for its participants using new generation channels.
• P. Morgan’s Payment Trends Report provides key insights on the direction of payments; here’s a summary of our findings.
• Innovation lag is going to be more dangerous than ever to a company’s survival.

This next decade will bring the embedded payment infrastructure to the forefront of the industry, spurred by recent world events like the COVID-19 pandemic. Amid store closures, retailers ramped up their e-commerce presence, including small businesses that hadn’t sold online before. According to digital payments company Square, the share of businesses accepting online payments increased by 13.2% from February to July 2020.

Payments are going to become truly global

Providing these options through embedded payments will unlock trillions of dollars of credit card payments for SMBs. Apart from this, China is the second highest growing market for embedded finance market, thriving at a CAGR of 15.8% and will hold a value of US$ 17 Bn by 2032. As digitization increases in the corporate structure, the digital lending sector flourishes and transforms.

The pandemic accelerated digital transformation, growing the market opportunity for modern payment providers like Plastiq that are enabling new forms of payment optionality that bridge gaps in the legacy payments ecosystem. These new systems enable platforms to expand the B2B payment options they offer to small and mid-sized customers through a set of bank-grade, secure Application Programming Interfaces . Businesses can now pay their suppliers by any payment method they choose, while enabling the supplier to get paid the way they want.

But it’s expected to grow faster than most other payment/fintech industries out there. And, considering almost one-fifth of all retail sales are now done online, embedded payments are becoming more essential every day. Around 125 million consumers are expected to use proximity mobile payment methods (payments with phones while in-store) by 2025.

Both of these approaches will require all payments data to be in one place to achieve a truly 360-degree customer view. Visa, Mastercard, MoneyGram and others are coming out with services to better facilitate cross-border payments. MoneyGram recently launched a service to transfer money to a digital wallet from almost any place in the world, and now, the company will connect customers and vendors from around the world as well.

Contactless Payments and Tap-to-Mobile Technology are Changing Retail

According to a survey by Visa, around 50% of all consumers feel that contactless payments are one of the most important safety features now offered in a retail store. There are examples of the potential of this coming out of the Asia-Pacific region, where super-apps let shoppers buy tickets, book hotels and more. Morgan is helping the world’s most successful brandsaccelerate digital transformationand enhance their Best Upcoming Embedded Payment Trends ability to create and grow value. A new bill to curb Visa and Mastercard’s dominance of credit payments is likely to rev up a long-time battle between merchants and card companies. «Bigger financial institutions that have the means are building their own cross-border payment channels might try to do so,» Baumann said. «While smaller FIs are looking to partner with fintech because it’s comparatively inexpensive.»

Thus, it comes as no surprise that 2022 is predicted to boast plenty of upgrades in the payment industry. AI applications based on machine learning algorithms are able to process large volumes of data and optimize payment processes. Besides, this technology has a lot of potential when it comes to payment security.

Major Payment Trends of 2022

Moreover, cloud vendors offer a sizable amount of resources for security concerns. The data encryption process is tedious as the data is encoded and transformed before moving onto the cloud. Since customers are making a habit of faster and convenient payment processes, they are now expecting the same level of service from B2B payments and transaction banking. Customers are heavily demanding for personalization, customization, and speed forcing the payment ecosystem for reconstruction for the corporate world. This has been gaining all the limelight due to the continuous increase for corporate loans in addition to the ease in credit underwriting standards. Besides, Omdia’s survey with Payment Issuers/Acquirers found that the spend on technology for alternative payments is likely to exceed that of traditional payments within the next 18 months.

The only restraint to the market is the unavailability of the internet, including the incompetency of the workforce. New risks involving financial transactions that lead up to fraud and malicious activities are also hindering the growth of the embedded finance market. Apart from this, the digitization of multiple sectors leads to cashless transactions, fueling the sales of embedded finance services.

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Splitit saw its customer base double while experiencing a 300% increase in revenue during 2020. Splitit also introduced BNPL services to the professional services sector last year, adding the option for customers to pay for professional services — such as accounting, dental and legal services — in installments. Cross-border payments and their efficiencies are an especially fruitful field for new players.

Embedded finance can be known as financial services that are not integrated with the banks. The embedded finance market is likely to strengthen its hold on the global market at a strong CAGR of 16.4% between 2022 and 2032. When the world was hit by the pandemic, the economic scenario was uncertain. Experts forecasted that mobile payments will reach $503 billion USD by the end of 2020.

In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the «Deloitte» name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. This is an ongoing international concern, and regulators are starting to pay more attention. In the UK, the Labour MP Stella Creasy has called for urgent regulation to stop young consumers from taking on an insurmountable mountain of debt. As more people get into debt, regulators around the world are likely to start cracking down, especially alongside the rise in inflation.

But moving to the cloud and building new experiences in ways that capture its many benefits is a puzzle of its own, proving complex and requiring niche skill sets in short supply. Besides, almost ⅔ of businesses that participated in Experian’s survey are also planning to raise their spendings on fraud detection. The cross-border transactions market is booming and is expected to reach $156 trillion in 2022. The digital world is bleeding into the physical, and consumer needs are taking center stage. Because of the higher transaction volume, Zelle has traditionally processed a larger transaction volume than its competitors. The number of total Venmo users is expected to be more than 100 million by 2025.