Embedded finance trends to pay attention to in 2022

The embedded payments industry is growing at a rapid pace, with revenues expected to grow from $43 billion in 2021 to $138 billion in 2026. As incumbents struggle with profits, new-age firms are forging ahead to take the lead in the Payments 4.X era by riding the success of non-card products and services. The new era demands collaboration, platformification, and firms can unleash full market potential only by embracing API-based business models and open ecosystems. Data prowess and enhanced payment processing capabilities are inevitable to thrive ahead. The clock is ticking for banks and traditional payments firms because the competitive advantage is not guaranteed forever. As industry players seek economies of scale, consolidations loom, and non-banks explore new territories to threaten incumbents’ market share.

Not only that, the use of third-party software means that companies don’t have to spend any time, resources and money into building products from scratch. They can easily integrate existing ones into their systems and focus on their core business propositions, whilst benefiting from the technology needed to meet customer demand. Among those who have several payment options loaded, 40% switch between cards every few weeks.

In the majority of instances, buyers want to complete their tasks easily and always look for the most straightforward payment path. According to a JP Morgan study, gig economy workers, insurance claimants and small and mid-sized businesses expect to receive and access their funds immediately. According to a Forrester webinar, nearly “36% of US online adults are interested in, currently use, or have used a “buy now, pay later” service for a large purchase.” A lot of this growth is expected to be driven by the upcoming Gen Z class of users. Overall, Zelle’s user base is expected to grow at a slower rate than Venmo’s. EMarketer also predicts that the P2P industry will generate over $1 trillion in transaction volume by 2023 (up from $785.9 billion today).

Here, we will review the main payment industry trends that are forecasted to affect both businesses and consumers in 2022. I think there will be a bigger push for seamless buyer journeys and everything online there. In groceries and delivery, I expect increased online ordering and user journeys, such as click and collect. And in insurance and telecom, I foresee businesses catching up quickly with the subscription economy to stay relevant to customers.

Apriva and J.P. Morgan offer an easier way for vending operators to get paid

“There will be continued growth in mobile wallet payments and digital card issuance.” 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. “The pandemic accelerated a lot of trends that were catching traction the year prior … Evolution from both the merchant and customer side picked up pace to evolve with changing market conditions.” “The pandemic accelerated a lot of trends that were catching traction the year prior,” Forrester analyst Lily Varon told Payments Dive. “Evolution from both the merchant and customer side picked up pace to evolve with changing market conditions.”

As the pandemic changed everything about daily life, many merchants pivoted quickly, finding new ways to engage with consumers. There are now more ways than ever to pay, a trend that will continue to grow as payments become increasingly seamless, embedded and contextual. P. Morgan’s Payment Trends Report provides key insights on the direction of payments; here’s a summary of our findings.

I think here in the US a lot of customers would be grateful to grab something they want right this second. With the advancing of fraud in retail, businesses are highly reliant on AI and ML, so it is only natural that the industry is expected to be worth over $17,440 million with a CAGR of 17.9% by 2027. In the near future, many countries will be planning to create government-backed digital currencies. It sounds like a complicated ecosystem – the idea is to provide a means of payment exactly where the customer wants it. According to McKinsey, in the near future, we are going to see a reduction in Asia’s prominence due to the expected macroeconomic slowdown in the Asia-Pacific region.

Gains were propelled by older customers in particular, who flocked to the services to replace cash and checks. Many payment platforms provided additional services like investment and trading, cryptocurrency transactions and debit card offerings to retain customers. Insurance companies are facing new challenges as consumers increasingly turn to online payment options such as digital wallets.

Starling Bank’s top investor cashes in shares as fintech hits £1bn+ valuation

Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe. This also means that international payments need to be as fast, cheap and convenient as any other payment type. Deploying the right providers and technologies is essential in delivering cross-border payments in real-time whilst causing no friction in the payments experience.

Businesses can now pay their suppliers by any payment method they choose, while enabling the supplier to get paid the way they want. In 2022, I expect other social media platforms to follow leading platforms’ examples by offering in-feed shopping capabilities. Meanwhile, to better serve creators, these social media platforms will likely embrace creator payments on a wider scale by making it easier for creators to receive tips or even a share of ad revenue. Payments technology will play a key role in enabling these effortless experiences for business-to-business and business-to-consumer users. The embedded finance market is slated to exceed $138 billion in 2026, up from $43 billion in 2021 per Juniper Research.

Payment Trends That Are Expected to Shape 2022

To respond to shifting customer behaviour like the move away from cash towards contactless payments, as well as regulatory imperatives, a more flexible and responsive payments architecture is necessary. Nimbleness will enable moving to a common set of payments processor microservices, cloud-based infrastructure and improved data strategy to serve the new use cases mentioned above. “We processed over $20 billion of payment volume, with almost 10 million consumers using PayPal in store,” Magats said. “Our products and services have never been more relevant and important for our customers than they are today.” BNPL companies including Klarna, Affirm, Uplift and Splitit experienced significant growth in 2020 as customers’ purchasing power dipped due to the pandemic.

“I think that digital P2P payment methods are becoming more common for micro-businesses,” Baker said. “And the play is most likely to be able to generate revenue from the app and secondarily to drive more consumer engagement.” “Most digital P2P apps are looking for ways to generate revenue and are offering bank-like products and services to drive revenue,” Talie Baker, a senior analyst at Aite said.

P2P payments started gaining popularity after the 2008 financial crisis, picking up significant momentum during the 2020 pandemic as well. What started as an efficient, easy and quick method to transfer funds and split pizza bills among peers has transformed into a multi-facet platform, serving almost as a bank. Venture capital funding for BNPL services also skyrocketed in the past two years as this payment channel gained customers.

Choosing the most straightforward payment option is driving the trend in payments. The idea is for payment solutions to become easier to embed in apps and APIs. AI and ML bring in a lot of value to customer service thanks to data – they personalize user experience and impact the bottom line. Many companies are now using AI to streamline internal processes, so it’s likely that we are soon going to see the same implementations happening in the payment section. Such payment processors take care of the entire transaction to make sure that merchants get paid quickly, from authorization to settlement.

China Utilizing Digital Silk Road to Provide Digital Access in Developing World

Large players like PayPal, for instance, are accepting digital currencies and enabling this phenomenon to become mainstream. Startups including Toq.io and FintechOS in the UK, Banxware and Afilio in Germany, and Younited Credit in France are emerging as the next wave of embedded finance flag bearers. All have closed fundraisings in 2021, Best Upcoming Embedded Payment Trends by investors including Goldman Sachs, Commerzbank, the World Bank and some of Europe’s leading VCs. It’s hard to get a handle on current usage numbers across all P2P platforms. But, according to eMarketer, the top three providers (Zelle, Venmo, and Square’s Cash App) were estimated to have a combined 165.7 million users as of 2021.

Companies with the help of top-notch technologies will rationalize this process. Numerous loan providers still demand customers to file paperwork and complete loan paperwork before they buy something. This fence to entry will lead customers to drop away as they are now used to a more simple and straightforward approach. Payment services are now integrated into different services to provide a better and user-friendly experience.

Payments Dive news delivered to your inbox

Morgan Merchant Services, Doug serves global clients by communicating our brand story, value proposition and innovation agenda. As a leader in B2B Marketing, his team is responsible for product marketing, competitive intelligence, go-to-market, and modern storytelling. Morgan, Doug spent 17 years at Microsoft most recently leading Office 365 Product Marketing for Enterprise and prior to that was responsible for the launch of Windows 10 globally.

• While it’s one thing to test the waters with different strategies, it’s equally important to assess the partnership at stake.
• The famous Neobank of the US, Chime also removed the ancient banking process to provide a swift banking experience from its mobile application and web.
• Big tech companies are going to play the role of financial companies thanks to their streamlined and frictionless processes .
• The embedded payments industry is growing at a rapid pace, with revenues expected to grow from $43 billion in 2021 to $138 billion in 2026.
• Get relevant updates on modern Fintech adoption with Fintech interviews, tech articles and events.
• Here, we will review the main payment industry trends that are forecasted to affect both businesses and consumers in 2022.

“Many customers are using these services for better budgeting reasons,” Varon said. Digitally deferred payments have been gaining popularity among users since 2019. In 2020, when finances were especially tight, customers pivoted to the buy-now-pay-later payment methods. In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.

Four ways big banks can get to grips with decentralised finance

Everyone is accustomed to seeing the symbol on a card reader that tells you it accepts tap payments. As of August 2021, PayPal had 361 million active users, so they already have a massive pool https://globalcloudteam.com/ of users to offer the service to. Of those, 38% have missed at least one payment, and three-quarters of those who have missed a payment have had it negatively impact their credit score.

Fintech companies and better technological models can help provide a better payment channel and reach emerging markets, Baumann said. This will create a space in the market that can lead to a rise in payment-as-a-service providers, Baumann said. P2P also helped serve SMBs during the pandemic, as they were looking for alternative contactless methods of accepting payments. PayPal and Venmo launched QR code payment methods for in-store payments, which helped many SMBs to accept contactless payments with low hardware integration costs. When finances were especially tight across the globe, consumers wanted access to their funds as soon as possible.

Best Tax Software For The Self-Employed Of 2022

A good example of embedded finance is the “Buy Now Pay Later” system, which enables customers to pay for their products in instalments rather than making a one-off payment. The rise of ecommerce played a crucial role in augmenting this concept, which is now being adopted by increasingly more industries. Looking at 2022, I believe digital transformation will play out in ways familiar and new for brands and consumers. For customers, digital experiences will become permanent fixtures across industries and buyer journeys. Meanwhile, businesses will see payment processes long overdue for change become more efficient and increasingly effortless.