Alex Common, Chief Product Officer, Pay360
There’s no doubt that 2022 was a significant year for the payments sector. With open banking payments growing 500% year on year, according to OBIE (Open Banking Implementation Entity), and payments becoming increasingly cashless while the industry’s role in fostering inclusion and supporting consumers through the economic downturn became a significant priority.
However, despite our economic situation, the speed of digitalisation across the payment sector continues to gather pace, as consumers demand faster, more seamless and more secure forms of payment. These rising demands put increased pressure on financial organisations to accelerate innovation and try to stay one step ahead. So, as we head into 2023, and as businesses plan for another year of rapid transformation, here are three payment predictions to help them prepare.
- Open Banking payments will grow
The adoption of payments using Open Banking technology will increase in momentum. We have already seen an impressive uptake of payments by open banking, with adoption rates growing from five to six million consumers in the UK in just six months in 2022. But, despite these impressive stats, sectors such as the public sector are slow to catch up. Even though HMRC launched its own open banking initiative earlier this year, saving up to £500,000 in public sector spending, we are yet to see this level of adoption across other areas of the public sector.
Moving into 2023 and beyond, it’s going to be up to both providers and merchants to ensure they are successfully providing clear messages around the benefits of payments by open banking, including its ability to enhance customer payment experiences. This will encourage further adoption across all sectors.
- More businesses will adopt subscription-based models
Businesses will continue to grapple with the uncertainty of the current economic climate, but the rate at which they are monetising their offerings through subscription-based models will continue to gather momentum. Over the last 12 months, we have seen a significant devaluation of companies across multiple sectors. Big tech companies like Meta, Alphabet, Amazon and Microsoft, haven’t been immune, with Q3 earnings reporting a combined loss of over $350 billion in market cap value. In fact, according to the British Chamber of Commerce, 39% of businesses across the UK believe their profitability will reduce over the next 12 months. During a period of uncertainty, businesses need to look at new ways to maximise revenue.
The monetisation of subscription-based services has seen significant momentum in the market. Take Mercedes Benz, for example. It recently announced that electric car users can now pay an annual subscription fee of £991 to enable their vehicle to reach 0-60, one second faster. With clear benefits like reliable recurring revenue, increased customer loyalty, and the ability to manage your financial forecast, heading into 2023, we will see a steady shift of businesses looking to further monetise their offerings through subscription-based models.
- Customer choice will increase in importance
In today’s digital economy, consumer behaviour has taken a significant shift towards the need for seamless shopping experiences across all channels. This level of expectation has subsequently translated to their expectation of service when it comes to payment choices too. The ability to offer customers the full range of payment options, whether in-store or online, has become a crucial aspect of the customer buying journey. For those merchants unable to give consumers their preferred method of payment, there is a danger they will simply turn to a competitor. In the battle for market share, it is vital that businesses offer best-in-class, frictionless, multi-option payment services across every channel in which they operate. With higher expectations, merchants are increasingly turning to software like integrated payment service technology which enables the merchant to meet the needs of all customers and allow their customers to pay by any means, anywhere. This is also where solutions such as Buy Now Pay Later (BNPL) come in – especially during the current economic downturn, customers seek flexibility and the ability to spread their payments in a way that works for them. As such, 2023 will be a year of increased BNPL adoption, as more customers use it, and more businesses introduce it as a payment option if they have not done so already.
It’s important to remember that offering the payment choices that customers expect is the means to retaining and attracting customers. Businesses which keep this front-of-mind can unlock a host of advantages. For Independent Software Vendors (ISVs), attention is on how maximise the value of embedded payments by implementing them in a way designed to drive customer acquisition. In the battle for market share, businesses need to ensure that they offer best-in-class, frictionless, multi-option payment services across all channels. As expectations increase, merchants are increasingly turning to software like integrated payment service technology, which enables the merchant to meet the needs of all customers and allow their customers to pay by any means, anywhere.
Fulfilling your potential in 2023
To survive and thrive in the economic downturn, while addressing customer needs for faster, more seamless and more secure forms of payment, businesses need to capitalise on critical trends to strengthen their business model, better support customers and ensure they have a positive impact on society. And how they respond will define how successful they will be in 2023 and beyond.
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