Across industries, consumers are communicating the same demands; they see the thing, they want the thing, and they want it in their hands within hours, if possible. And if it’s not possible, they wonder why not since it usually is through Amazon.
Because money is what makes the world go-’round, the payments industry has responded to this heightened sense of urgency from consumers to get ahold of merchandise, services, and funds seamlessly, immediately, and with little to no human interaction by creating more innovative payment products, providing more flexible payment models, and paving more payment avenues.
In 2023, we expect to see this response exaggerated and heightened. Here are some of the biggest payment trends we’re forecasting for the new year.
With the widespread popularity of digital payments continuing to grow, security remains at the forefront of concern for payment companies and their vendor partners. In fact, according to The Business Research Company’s 2022 Payment Security Global Market Report, the payment security market is expected to reach $43 billion by 2026. Vendor and payment companies alike are seeking and creating solutions to provide their customers with the most secure digital payment experiences possible. One example of this effort, which we expect to see more of in 2023, is biometric payments.
A biometric payment is a point-of-sale technology that authenticates payments by pairing a payment card with a physical identifier of the cardholder. The most commonly used physical identifiers for authentication are fingerprints and facial recognition scanning. Both Visa and Mastercard rolled out pilot biometric payment cards in 2022.
Visa launched its pilot biometric payment card with Mountain America Credit Union and Bank of Cyprus, introducing the fingerprint scan as an alternative authentication method to a pin number. To use this offering, cardholders enrolled a fingerprint to have securely stored on their card. The card had a fingerprint-reading sensor that users place their fingers upon during a transaction. If the fingerprint matched the fingerprint stored in the card, a green light flashed, and the transaction was authenticated. This card was useable in transaction terminals that accepted Visa cards, so no new POS systems were needed.
The Mastercard’s pilot biometric technology, on the other hand, if widely adopted, would require more intensive widespread hardware and software updates. To partake, users had to take a photo of their face or scan their fingerprints and register them in an app, linking the identifier to a payment card. At the select stores that participated in the pilot, users could either scan their face or their finger to complete transactions, eliminating the need for a physical card, but requiring stores to have compatible POS systems with facial and fingerprint scanners.
Social Media as a Payment Channel
Considering that the average American spends 147 minutes a day on social media, it is no surprise that businesses across industries seek the visibility that social media advertising and eCommerce can provide.
For example, many companies have reaped the benefits of using Instagram’s shopping capabilities. Instagram rolled out its Instagram Shopping feature in 2020, satisfying today’s customer’s itch to mindlessly scroll and the much sought-after instant gratification high from “adding to cart.” One avenue for Instagram Shopping is the Instagram Shopping tab, where users can search for specific items and shops, or filter item type by category and simply peruse, just as they would on their standard Instagram feed. In addition to the shopping tab, Instagram also allows vendors to create “shoppable” posts that can be posted anywhere on Instagram. Shoppable posts are photo posts of merchandise that have hyperlinks to their respective product pages. All of Instagram’s shopping features allow users to add items from multiple vendors into an Instagram-operated cart. According to Instagram, 130 million user accounts tap on shopping posts to learn more about products every month.
In 2023, we anticipate that more and more vendors will hop on the Instagram Shopping train. We also expect other social media channels to roll out their own shopping capabilities or upgrade their existing shopping features. The success of social media payment capabilities showcases the need to meet customers where they are.
Subscription-Based Payment Models
Between entertainment, health and wellness, food, alcohol, pet goods, and apparel, the subscription commerce model has made its mark on just about every industry. Subscriptions jumped in popularity at the onset of the pandemic for various reasons, among them being that people craved their familiarity and predictability and most subscription services don’t require people to leave their homes.
Today, we have seen many consumers stick to the subscriptions they acquired during the pandemic because they have grown accustomed to the convenience, comfort, and variety that their subscription models have provided them. On the other side of the token, however, prices have inflated, and for many, subscription-model goods and services are the first to be cut when trying to lower monthly expenses.
Therefore, in 2023, it is essential for businesses that use subscription commerce to offer a lot of variety and flexibility with their plan management to ensure they don’t ostracize customers. Successful subscription-based vendors will need to allow customers to easily pause, skip, and edit their subscription plans.
Buy Now, Pay Later (BNPL)
BNPL has been making waves in the payments space for several years now, and for 2023, we expect that it will continue to evolve in its variety and sophistication. In fact, according to research by eMarketer, the number of BNPL US users is forecasted to climb to 88.2 million this year and 94.4 million in 2024.
In the beginning, the majority of BNPL purchases occurred between retailers and end customers in the apparel and cosmetics spaces, but there has been a shift toward using BNPL for bigger ticket items, in both business-to-consumer and business-to-business landscapes. With this shift has come the infiltration of BNPL into new industries, such as manufacturing, education, healthcare, and raw materials.
Real-time payments (RTP) are account-to-account fund transfers that permit the immediate availability of funds to the beneficiary of the transaction. They’ve gained a lot of traction in recent years, in part due to the enhanced visibility of and accessibility to funds they allow. In fact, according to ACI Worldwide’s 2022 Prime Time for Real-Time Report, real-time payments had a transaction volume of $118.3 billion in 2021, a year-on-year growth of 65%.
Currently, India is the dominant leader in the RTP space – 48 billion real-time payment transactions occurred in India in 2021 and the number continues to grow. The widespread adoption of real-time payments resulted in an estimated cost savings of $12.6 billion for Indian businesses and consumers in 2021, helping to unlock $16.4 billion of economic output. Given these monumental savings, other countries are eager to amp up their real-time payments capabilities; according to Fact.MR, the overall market for real-time payments is expected to advance at a compound annual growth rate of 33% over the next 10 years, reaching a yearly volume of about $300 billion by 2032.
In the United States, the Federal Reserve Bank is expected to launch its FedNow Service midyear, which will be available to depository institutions in the United States and provide “interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real-time and at any time, any day of the year.”
Since the FedNow Service is backed and operated by the federal government, it cannot turn a profit, paving the way for it to be more competitively priced and accessible to financial services institutions than other real-time systems. Given this new practicality, many financial services institutions are lining up to participate in the program.
In 2023, successful payment companies will continue to prioritize and emphasize the convenience and flexibility of transactions while balancing customer choice. No longer will consumers settle with being burdened by a friction-filled payment experience; competition is endless, and customers will be quick to take their business elsewhere if they cannot conduct a transaction in the manner they prefer.
Perficient specializes in strategizing and engineering seamless point-of-sale and embedded finance experiences for businesses across industries. Reach out to one of our subject matter experts today to learn more about how we can elevate your customer experience.