The outlook for payments in 2022 and beyond
2021 has seen a seismic change in the payments landscape, with higher consumer demands for non-traditional methods such as QR payments, payment links and digital wallets.
It goes without saying that a major driver of this process has been the pandemic, which accelerated an already underway adoption of these solutions. We are seeing growth in the fintech universe with its range of digital banks and wallets resulting in exponential user growth and wide adoption across different sectors, from gaming/sports to retail and e-commerce.
Companies who are reaping benefits from this trend have applied a user-centric approach in the way they design products and solutions to meet users’ demands and preferences.
So, what’s next for 2022?
As we head into 2022, there will be more opportunities for the fintech industry to take advantage of.
Covid restrictions are likely to be tightened in the near term due to the new Omicron variant. Social distancing and travel restrictions are only going to further push the need for digital payments, even more so in countries with lower adoption of contactless or mobile payments.
People will continue to shop online, and the emergence of digital wallets as a payment option will drive considerable value for both merchants and consumers across the globe. There is no doubt that in 2022 we will see the continued growth and expansion of digital payments. We are already seeing the compound annual growth of digital wallets at a rate of 23% and this is likely to account for almost a third of payments.
From an innovation standpoint, we will continue to see more advancement in payment processes. 2021 was a year of transition, but in 2022 we can expect more industry consolidation and payments becoming a critical function of every business, providing user-friendly and frictionless customer experience.
For example, voice-enabled payments as an alternative method have been rising steadily for the past three years. As consumer interest grows for more digital options to pay, merchants must keep up with these developments and diversify their payment offerings to sustain their business.
The payments industry is mainly being fuelled by the changing demographic trends. Millennials, in particular, are responsible for the broad adoption of digital payment solutions and they will continue to drive mobile and digital payments adoption.
As the most active mass consumers in the market whose habits are intertwined around technology such as phones, computers, tablets, smartwatches, and the internet, they want a frictionless experience from every goods and services provider.
Millennials are the biggest users of digital wallets out of all the generations, with globally over 44% indicating that they use mobile wallets, 34% interested in doing so and out of all those, 64% agreed that purchases are made easier through mobile wallets, according to recent FIS data.
This group of young consumers makes the digital realm – as opposed to the physical world – the primary place for the purchase of goods and services, and therefore demands technological solutions when shopping.
They are more comfortable using smart devices and online platforms when shopping and making payments compared to the older generations. They are digital-first generations who naturally demand digital processes to run their day-to-day life, utilising different apps, social media and digital channels to engage with brands and shops, demanding personalised responses from companies.
How a user-centric approach helps businesses and consumers embrace a cashless future
The digitisation of countless processes that had previously been carried out face-to-face has been driven by the pandemic. The world is rapidly moving towards a cashless or cash-lite society and more demand for digital payment services.
However, we are now seeing a reverse trajectory taking place. Digital solution providers are now expanding their service propositions by introducing new payment options that allow people to embrace face-to-face interaction. Examples of these could potentially include making payment for petrol via a QR code or using a digital wallet or payment link to pay at a restaurant.
The companies who are doing this are classified as end-user orientated. They understand what their users’ preferences and demands are, as well as which environments they feel most at ease. They then use this insight to develop tailored solutions accordingly.
Growth potential in emerging markets
Companies who understand the value of a user-centric approach can create an environment that provides security and forms a bond of trust with the users without substantially impacting their experience.
One of the reasons for this is that understanding the necessity of having a personalised service unlike a traditional environment, as well as understanding how to utilise digital channels to communicate effectively, will build loyalty and prevent the business from losing its customers.
These types of companies have grown more in emerging markets where the network infrastructure is not advanced, and the level of banking penetration of the population is still low with very limited access to traditional financial institutions.
There has been robust growth in India, where mobile payments are becoming popular as a convenient, hassle-free and secure way of dealing with payments, and they are extensively used in several industries including food service, retail, e-commerce, gaming and entertainment sectors.
This demonstrates how technological development – widespread adoption of smartphones, improvements in the network infrastructure – and significant growth in the e-commerce sector have paved the way for user-centric companies to promote digital payments and build loyalty with their customers.
What this means for fintech companies
The exponential growth of digital companies now means that they are more mainstream and not just a niche innovation. So, we can envisage users beginning to place their trust in them, even using them to collect salaries and hold their savings. The best fintechs to take on this role are those in emerging markets, because they have previous experience in gaining the trust of millions of users and know how to operate this process for new users from a digital-first perspective.
It is also important to point out that providing an excellent shopping experience must not be overlooked, as it is now an obligation, dependent upon all the players involved in the process. It is an increasingly important component that cannot afford to be overlooked, it will make irrelevant any player that does not focus on it.