World Payment Report 2022

The latest edition of the World Payment Report 2022 is now live. As we can all acknowledge, work, shopping, travel, entertainment, services, and commerce all look a bit different from 30 months ago.

The impact of global events has similarly reshaped the payments industry as individuals, governments, and businesses re-examine priorities and success strategies.

After rebounding from the aftereffects of COVID-19 faster than most sectors, the long-term prospects of payments appear solid, even as rising signs of recession challenge other markets.

As mentioned in the World Payments Report 2021, the year-over-year growth of non-cash transactions is triggering the adoption of new and alternative payment products (QR codes, digital wallets, and account-to-account payments) and accelerating demand for cross-border and instant payments.

This year’s World Payments Report examines the growing importance of the B2B payments value chain and small and medium businesses (SMBs) – the global economy growth engine.

SMBs represent an opportunity for payment specialists to capture a burgeoning market. Yet many financial institutions have overlooked smaller enterprises to focus on retail and corporate accounts.

And currently, SMBs struggle with poor cash flow and long conversion cycles, which may trigger a growth-prohibitive liquidity crisis.

Moreover, during our conversations with SMBs, we learned they feel underserved by their primary banks, and nearly 90% are considering services from challenger banks and alternative providers (PayTechs and BigTechs).

The report believes banks and PSPs must innovate their front-end B2C payment capabilities and evolve their back-office payment value chains to retain a leadership position.

The timing is right for payment firms to select and assemble building blocks in various combinations to satisfy customer requirements via layers of services and capabilities on a composable, API-powered platform.

Platform upgrades and payment hubs will lay the foundation as banks slowly but surely transition to the ISO 20022 (MX) standard from the ISO 15022 message type (MT).

The legacy predecessor was adequate until the pandemic sparked sweeping digitalization, with some banks experiencing a greater than 90% shift to digital transactions.

Further, today’s financial regulations require banks to use more exacting, data-rich, quickly tracked messaging to comply with regulatory requirements.

ISO 20022 will harmonize data-driven platforms and connect payments ecosystems, enabling SMBs to take advantage of change-as-you-go payment formats or plug-and-play third-party offerings – all necessary to sustain and future-proof business.

Banks’ adoption of the new message standard is crucial as payment value chains become longer, more complex, and non-linear – and transaction and interaction volumes explode.

And at the same time, new technologies, such as distributed ledger technology are emerging.

According to the report, to stay in the game, payment players need to develop compatible systems to integrate DLT. This requires firms to harmonize data at technology, enterprise, ecosystem, and industry levels.

While it cannot predict how digital ledgers will ultimately affect the payments industry, the World Payments Report 2022 offers options for banks and PSPs to consider based on their appetite for investment and risk.

The report reviews strategies that may bolster core infrastructure to enable industry competitiveness, such as partnering with central banks to explore central bank digital currency (CBDC).

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