The COVID-19 pandemic has significantly accelerated the volume and value of digital payments, in 2022 we will see the next phase of digital payments as alternative payment methods become the norm. Buy now, pay later (BNPL), digital wallets, and account-to-account (A2A) payments will continue to eat share of traditional payment methods such as cards and cash.
Alternative Payments Are Shifting to the Mainstream
Traditional payments are increasingly less important for technology executives: fewer than a quarter of respondents in a recent survey selecting traditional payments in their top three IT projects, while a third of respondents selected alternative payments as a top priority.
Similarly, spending on technology in alternative payments is expected to outgrow traditional payments significantly over the next 18 months as issuers and acquirers adapt to an unprecedented demand for digital payments.
Merchants are actively adopting alternative payments with A2A payments, digital wallets, and buy now, pay later increasingly visible alongside card networks and traditional automated clearing house (ACH) payments at checkouts.
Some merchants are seeking to restrict certain traditional payments: Amazon has announced it will no longer accept Visa credit cards in the UK from 2022 in response to the interchange fee rising from 0.3% to 1.5% following the UK’s exit from the EU.
Open banking payments, such as A2A, will likely benefit in 2022 from the rising processing costs of card payments, and other merchants may follow Amazon’s initiative.
Embedded Payments Is the New Expectation at the Checkout
Embedding the payment is about not just ensuring a seamless user experience but also about harnessing customer data to present the consumer with relevant, personalized financing options at the point of purchase to reduce friction.
In 2022, embedded payments will be driven at merchant-level and expect the likes of Amazon, Walmart, and Starbucks to reward loyalty with favorable payment terms at the checkout, which minimize processing costs for the retailer whilst ensuring a frictionless purchase journey.
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