The last year saw substantial change for consumer payments. BNPL (Buy Now, Pay Later), mobile payments and SoftPOS entered the mainstream, while CBDCs took another major step forward.
2023 – digital wallets, SoftPOS and CBDCs
But what’s next for the payments industry? To answer this question, Payments Cards & Mobile speaks to Tommaso Jacopo Ulissi, Head of Group Business Strategy at Nexi Group.
Many said that Buy Now Pay Later (BNPL) would become mainstream in 2022. Was this the case?
As we predicted, BNPL made huge strides in becoming a mainstream payment method in 2022. From the merchant perspective, BNPL has driven conversion rates and increased sales, attracting consumers through offering more flexible payment options.
While BNPL has expanded opportunities for merchant sales and consumer purchasing, its business model may soon face scrutiny with higher interest rates and increasing costs of capital.
In the long-term this shifts the focus from pure growth to sustainability. There are also concerns regarding unsustainable over-consumption by consumers.
The world faces a challenging macro-economic environment in 2023, so regulators must focus on further understanding how to balance the need for growth and innovation with sufficient protection for consumers.
How did the role of mobile grow over the past year?
Consumer payment preferences have continued to evolve from paper-based to digital payments.
In 2022, mobile payments surged as a popular in-store payment method. This has been driven by convenience offered by ubiquitous technology, such as the security offered by biometric authentication in mobile payments.
At Nexi, we have seen mobile payment transactions boom, with a 185% increase in 2022 compared with 2021.
By the end of 2023, we predict mobile payment values will reach €445 billion at a European market level.
2022 also confirmed that mobile solutions designed to solve customer problems and address merchant needs are in high demand.
SoftPOS technology, for example, is tailored to provide additional opportunities for merchants to accept payments with increased flexibility and convenience from their smartphones.
SoftPOS offers customers a streamlined and flexible shopping experience where they don’t need to queue at a specific Point of Sale (POS).
This helps the merchant free up staff from cash registers to focus on enhancing the customer experience.
Without the reliance on dedicated hardware at the POS, rollout can take place much faster, and at a minimal cost compared to standard payment infrastructure.
This brings more versatility to an already flexible and simple solution, especially as a companion or as a back-up device.
How will consumer preferences impact payments in 2023?
Consumers are becoming more sophisticated when using online payments. We see this, for example, through increased adoption of online payments.
They expect not only a seamless and safe payment experience, but also a more personalised customer journey, starting from their mobile.
We therefore expect further growth in the use of other smart devices and digital wallets throughout 2023. These will be closely tied to our digital identities as legislation in Europe continues to advance.
In addition, increasing adoption of other complementary payment methods such as Account-to-Account will characterise the ongoing digitalisation of everyday purchasing.
How do you expect merchant strategies to evolve?
Digital is becoming central to merchant business strategies.
While we expect SoftPOS to catalyse momentum for increased digitalisation, we also expect merchant offerings to become more sophisticated.
This will be done through adding increasingly frictionless payment experiences to their offerings.
Merchants will progressively adopt omnichannel solutions, aiming to capture ecommerce growth, and will implement data-driven value-added services (VAS) to increase conversion on online and offline platforms.
This mirrors increasing convergence between software and payments into commerce platforms, also via Independent Software Vendor and Payment Service Provider partnerships, to provide business management capabilities to merchants across the entire lifecycle.
This is personalised to the needs of each segment, including the restaurant, hospitality and retail industries.
These platforms will become a one-stop commerce solution for merchants where financial and other additional services will be progressively embedded.
Will CBDCs be big this year?
From a global perspective, over the next year the payment ecosystem will face changes at a systemic level.
This change will witness accelerated efforts from Central Banks to develop regulated and viable digital currencies.
In 2022, the EU, China, India and many other countries all made steps towards developing their own Central Banks Digital Currencies (CBDCs).
The UK has stated its intention to explore and launch a digital pound this decade, and we expect more countries to make similar moves.
CBDCs have the potential to offer a safer, faster and cheaper cross-border payment experience for banks, retailers and consumers.
This promotes greater financial inclusion in a world where new forms of private-led money, namely cryptocurrencies and stablecoins, have turned out to be risky investment assets rather than a digital storage and transfer of value.
As economies around the world are put under increased strain in 2023, CBDCs provide an opportunity to strengthen central monetary sovereignty.
The launch and progressive roll-out of the Digital Euro will be one to watch out for in the European industry.
How do you think we can move the FinTech industry forward in 2023?
Corporates will have to navigate uncertain economic environments in 2023. To succeed during this time, they need to be closer to merchants and consumers, putting them at the centre of their strategy.
Equally, FinTechs must develop products and solutions to best answer specific client needs.
Investment in new skills is also crucial to the acceleration and transformation of the digital payments market in 2023.
FinTechs should focus on how to attract new people in a challenging talent market, while they commit to upskilling new hires, to ensure that they have the specific technical skills required to develop the next generation of payment technology.
With strong internal expertise, businesses can develop innovative solutions at a reduced time-to-market, allowing them to get ahead of competitors.
Finally, financial institutions are under increasing pressure from regulators and investors to prove their commitment to net-zero and sustainable finance.
FinTech companies should define concrete priority actions in relation to climate action in 2023. They should look to provide services that address the need for a more informed and environmentally-friendly approach to daily consumption habits.
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