It’s no secret that the past few years have had a wide-ranging impact on many of the ways our world works. Payments are no exception.
For instance, many consumers were forced online — and a significant portion for the first time. What some may have thought temporary shifts in payments behavior early on have likely become permanent. Today, ecommerce spending (excluding travel) is nearly 1.5x what it was pre-pandemic, in 2019.¹ And nearly 60% of consumers say that the way they pay has changed forever.
This mass online onboarding has also contributed to accelerating the pace of cash digitization. Debit payments volumes, in just the past year, grew by nearly a quarter² — and relatively consistently around the world — suggesting that the digitization of cash is happening at a rising speed in both emerging markets and developed markets.
And while much uncertainty remains, against a backdrop of cash digitization and changing consumer preferences, a number of trends have begun to solidify — particularly those that involve re-centering the consumer. Here are a few we’ll be watching closely in the year ahead:
1. Tap to Pay’s moment in America
While much of commerce has moved online in the past few years, people do still pay for goods and services in person. Outside the United States, more than 70% of all face-to-face transactions globally happen with a tap, and more than 70 countries and territories have higher than 50% penetration rates for contactless transactions.²
In the United States, rates of contactless in-person payments still lag behind much of the world, but have exploded over the past few years. Today, in the United States, there are more than 4x the number of contactless cards than there were just two years ago, and penetration has more than doubled over that same time period. In some cities, like New York and San Francisco, penetration as more than tripled. We anticipate the already global trend of tap to pay to continue to grow in popularity in the United States—partly as a result of consumer demand as social distancing and other contactless COVID protocols remain, and even more so because the framework is in place, with 75% of all F2F transactions occurring at a contactless enabled merchant, and more than 400M cards in the US now contactless.³
2. BNPL booms
Over the past few years, alongside the explosion in ecommerce and rapid cash digitization, a range of Buy Now Pay Later (BNPL) offerings have made great strides in terms of giving consumers new and innovative ways to pay for the things they need now. What some initially wrote off as a fad can no longer be ignored, as consumers show a clear desire for new ways to leverage credit lines.
In fact, we anticipate BNPL to grow this year, particularly as credit card providers roll out installment programs for their clients—new ways for clients to use their existing credit lines in a BNPL fashion. Why? Because there is a clear consumer demand for these kinds of service offerings. Among U.S. credit-card-holding adults, nearly a quarter (24%) say they are “much more likely” to use a BNPL service if offered through their existing credit cards. Add to that figure the number of U.S. adults with credit cards who are “somewhat more likely” to use BNPL attached to their existing card, and the share becomes almost half (49%). Of that same group, 25% are “very likely” to use BNPL if those purchases qualified for the same kind of loyalty rewards as their credit card purchases, with another 45% being “somewhat likely.”⁴
3. Crypto matures
Humans have been exchanging currency for the last 5,000 years, so in the grand scheme of things, crypto is still in its early infancy. Despite its newness, crypto has captured the attention of consumers, investors, developers, policy makers and pretty much anyone who’s picked up a newspaper in the last year.
While it remains to be seen what role these technologies will play in the future of money, if anything is clear, it’s that it is primed for greater adoption. More than half of the crypto-aware adults we surveyed said they would like their bank to offer cryptocurrency — and nearly 40% of crypto owners say they’d be likely to switch primary banks to one that offers crypto products.⁵ Add to that the fact that a significant number of central banks are evaluating CBDC and a number are eying pilots, and it becomes increasingly clear that financial institutions will quickly need a strategy for crypto — a strategy that hinges on helping consumers connect, seamlessly and securely, to the crypto ecosystem.
4. Consumerization of B2B payments
Many of the recent evolutions in consumer payments have been driven by an increased focus on the experience and needs of the individual. And the broader shift in consumer expectations is such that access to global financial tools is expected to be quick, digital, and transparent, almost bespoke. But many often forget that B2B is still run by people — people who wonder why the same kind of emphasis on innovation, convenience, security and speed isn’t placed in today’s B2B ecosystem. From these forces, we expect to see an increasing consumerization of B2B payments.
This means many different things for different segments of this market. For instance, the growth in ecommerce needs for SMBs and marketplaces has contributed to driving secure and quick digital payouts. At the same time new payment schemes and networks are being developed and proliferating, Fintechs and other new market entrants are developing solutions with the potential to reshape cross-border money movement. And as real-time payments, transparency and traceability, and the overall experience of consumer payments improves and is modernized, we expect to see demand for similar improvements across B2B money movement.
5. Banking opens up
Open banking is unique in the sense that it is a boon for both consumers and businesses. In a few words, open banking refers to a kind of return of ownership of consumer data to consumers. Put differently, through APIs, open banking enables the sharing of consumer financial data, with their consent, with trusted third parties who develop innovative new financial products and services to help make consumers’ financial lives easier.
Like the consumerization of B2B payments, the financial sovereignty ethos of some of the emerging digital asset ecosystem, and BNPL as the result of consumer demand, we see open banking as a continuation of this “re-centering of the consumer,” putting more information and decision-making power about their own financial destiny back into their own hands. We see the true promise of open banking as ultimately making the financial lives of consumers more reliable, secure, and simple — and increasing the possibilities for those fintechs who would make that world reality.
Re-consider the consumer
If the past two years have shown us anything, it’s that the future can be slippery — hard to grasp, and even harder to predict. We imagine that, as a society, there’s still some unanticipated turbulence ahead in the years to come. Even so, in the new, digital future, we do believe that those businesses best suited to surmount those challenges yet to come will be those who truly do center consumers, situating client needs and demands at the very core of their offerings.
- Visa 2021 Q4 earnings report
- https://annualreport.visa.com/chairman-and-ceo-message/default.aspx
- Visa 2021 Q4 earnings report
- Morning Consult & Visa BNPL Study, November 2021
- The Crypto Phenomenon: Consumer Attitudes and Usage