Retail payment trends
In the countries where we work, payments are accelerating hard towards the future. There’s a sense of urgency about innovation. Everyone’s talking about which new technology might be the next game-changer and huge appetite to continue the momentum away from cash. There are a number of payment trends in 2022 that are making the shopping experience increasingly consumer-friendly.
Every market is different. For example, in the USA, forecasters are getting excited about the prospect of increased digital wallet uptake. In the Middle East that’s definitely last year’s news!
Digital wallet uptake and functionality is already advanced – in a recent McKinsey survey, 60% of payments experts in the Middle East expected digital wallets to be the preferred method of payment by 2026.
The question now is how wallets will continue to evolve; for example, will cryptocurrency wallets become mainstream? As Apple Pay and Google Pay have added crypto to their wallets, it may be only a matter of time before shoppers can buy real-world products in store using Bitcoin, Ethereum or other cryptocurrencies.
Buy Now Pay Later
Before credit cards existed, retailers in some markets offered customers the ability to pay in cash instalments, usually with interest added to finance the loan. In 2022, BNPL is having an unexpected resurgence thanks to the growth of ecommerce during the pandemic, and now it’s interest-free. Retailers are looking for increasingly simple ways to convert browsing to purchase and embedding BNPL at the point of sale improves conversion rates. Insider Intelligence estimates that BNPL will be worth USD 680 billion worldwide by 2025. For consumers BNPL means no credit card fees and the ability to buy goods they couldn’t otherwise afford. Banks, fintechs and merchant acquiring networks will compete fiercely to participate in the BNPL segment and protect existing revenues.
Super apps offer a fully integrated shopping experience, allowing consumers to take advantage of BNPL alongside other financing and banking products as well as offering the ability to spend in a wide range of online retailers. In the Middle East ZoodPay integrates a marketplace of online merchants to offer instalment payments to extend financial inclusion. Super app Tabby has more than 1 million active shoppers in Saudi Arabia and the UAE, positioning itself as an alternative to exploitative credit card fees and reducing the amount of purchases made using cash on delivery.
When payments innovations align, it creates a sudden uptick in consumer adoption.
One of the advantages of Open Banking is the part it can play in facilitating consumer credit scoring, allowing providers to assess risk on products including BNPL and other lending.
Regulators will need to decide how to balance ease of purchase with consumer protection, but Open Banking provides real-time access to customer data and the ability to assess whether consumers can afford to purchase the goods or services in their basket. It also makes it really easy for fintech developers to build products that access that customer data using APIs.
One thing is sure, traditional payment methods will further decline, as newer, frictionless alternatives gain traction. Who thinks now of going to an ATM to withdraw cash, or paying by paper check? Even card issuers, who have seen massive uplift in contactless transactions, need to keep an eye on whether their products can remain competitive in a digital ecosystem where lower cost of use is a key differentiator.