2022 saw accelerated growth in the use of digital payments across the world. Many of the payment trends that ruled last year will continue to play a major role in 2023. Consumers’ preference for safety and convenience remains a top priority and will have a strong impact on how these trends build up this year. Here is a look at the five key payment trends of 2023 that businesses need to know about.
Top 5 Payment Trends in 2023
Over the course of last year, many e-commerce retailers offered customers BNPL payments from leading players such as Klarna and Clearpay. According to this report, BNPL payment adoption will grow steadily from 2022-2028, at a CAGR of 23.9%.
This fast-growing alternative payment method is especially preferred by merchants and customers for its flexibility and easily accessible consumer credit.
BNPL is also being seen as good option for B2B payments because of its fast and seamless B2C-like payment experience, with flexible terms. This makes it easier for merchants to pay vendors and partners.
However, there are a few issues that have drawn the attention of different governments and regulatory bodies in the EU. These are:
- Lack of clarity in current BNPL terms and conditions.
- Customers spend more than they can afford and thereby face higher interest rates.
- Credit ratings suffer because of late repayments.
In 2023, countries that are offering BNPL schemes are expected to draw in new regulations or make changes in current laws to tackle these issues.
2. Digital Wallets
Many countries in the EU saw a rise in the use of digital wallets in 2022. It was one of the most popular methods of payment for e-commerce shoppers and is expected to gain further momentum in the coming year. Globally, digital wallet users are expected to exceed 5.2 billion by 2026, as per a recent study. With features like QR codes and NFC, the digital wallet has become a cost-effective solution for businesses and customers. By allowing people to make spontaneous and regular payments in a safe and secure manner, the e-wallet has also accelerated the EU’s goal of stronger financial inclusion and interoperability. Currently, PayPal is the most-preferred e-wallet in Europe, followed by Apple Pay, Google Wallet, and a host of local ones.
3. Real-time payments
Real-time payments are getting bigger, finding favour amongst consumers and businesses. And this is expected to continue. Apart from real-time transfer of funds, instant payments also provide real-time insights. This allows businesses to maximize their working capital, improve cash flows, and derisk their business. In the EU, open banking infrastructure is maturing, and a variety of RTP systems are now active. Some of these include P27 in the Nordics, Faster Payments in the UK, and SEPA Instant Credit Transfer in the EU. In 2023, there will be more focus on the adoption of real-time payments in the B2B sector.
4. Voice Payments
With the global market expected to reach $12.2 billion by 2028, voice-based payments are the next big thing in the world of payments. Ease of use, security, and privacy make this payment method a highly preferred option for both consumers and businesses. Voice payments enable businesses to proceed with effortless financial transactions, through simple voice commands. This helps businesses to offer more extensive services and a seamless customer experience. In 2023, we can expect to see more innovation around voice payments, making them more inclusive to suit the needs of different industries.
Fraud prevention will continue to be a top priority in 2023. Biometrics, such as fingerprint scan or Face ID, is one such area that is becoming a standard in payment authentication.
Biometrics helps a business to thoroughly verify that a user is genuine and prevent fraud, thus ensuring customers enjoy a secure checkout experience. In 2023 more businesses will look at using biometrics in their payment setup. We can expect to see more innovation in how biometrics are used to keep payments secure.
Last year the EU payment industry placed a strong emphasis on real-time payments, BNPL, digital wallets, and the upcoming CBDC. As the European market continues to grow, these trends will play a vital role in shaping the industry this year. Continuing the focus on interoperability and financial inclusion, governments and fintech groups are keen to utilize technology to help businesses evolve. As such, payment methods that are efficient, effortless, and secure will continue to receive priority. Globally, new and emerging technologies will continue to impact and influence the payment industry. Thus, we can expect to see stronger partnerships between industry, governments, and regulators in future.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.