The 5 Payment Trends That Businesses Need to Watch in 2023
While payment types vary throughout the world, both consumers and businesses share a common goal: they want secure, fast, and convenient payment methods, regardless of the time and place of transacting. The question for retailers is what’s in store for the future and how they can adapt when implementing new payment options.
If you own a business, you first need to know the trends in the financial sector and keep updated on them. Technologies like the blockchain have revolutionised the payment system, from the creation of smart contracts to the elimination of third-party verification. You can now purchase a plane ticket or a high-end watch with cryptocurrency once you create a free account on Binance and buy Ethereum online with the several payment options available. However, since prices in the crypto market fluctuate a lot, it’s important to thoroughly research and understand what they’re all about before venturing into this world.
Clients today expect to make purchases using a plethora of methods, like cryptocurrency, BNPL, etc. Let’s discover the 5 most popular trends and payment methods so that your business will be prepared to provide solutions, possibly increasing the number of sales captured.
The Buy Now, Pay Later system is gaining ground
BNPL has exploded lately, and the appeal is clear to many consumers. According to research from Global Data, the BNPL market size is expected to grow at a CAGR of 33.3% during 2021-2026. This type of credit app has gained popularity as a payment method among Gen Z and Millennials, who can now buy a variety of high-value luxury goods at zero or interest-free cost.
However, the apparent advantages can also pose a risk for lenders and borrowers. For example, the debt may increase if a borrower fails to make an installment payment. Customers will be charged late fees if they are late on their payments.
In 2021, the Europe BNPL transaction value was the highest, accounting for more than 40% of the total market size. In 2022, 65% of merchants planned to implement this payment method. Two of the benefits of investing in a BNPL program are the power to convert browsers into buyers and learn their tastes.
The BNPL main spend categories include the following:
- Home appliances and electrical goods
- Footwear and clothing
- Sports and fitness equipment
- Media and entertainment health.
QR Codes are commonplace
The journey of QR codes is fascinating. In the early to mid-2010s, they boomed, only to go on a hiatus for the following period. Probably, the world wasn’t prepared for such a revolutionary technology back then. The pandemic, however, had them return with a vengeance when venues and brands were struggling to prevent cross-contamination through money and receipts.
From information sharing to payment to marketing, they have become essential for business-customer communication. Over the past two years, they’ve been one of the most significant trends in customer engagement and marketing. They’re now prevalent in many settings, like restaurants, where you can scan a code to place an order and pay for your meal without waiting for a server, or in physical stores where you can simply scan a QR code payment and skip long queues.
QR code payment users are estimated to make up 29% of all mobile phone users globally by 2025. The main factors driving its adoption are as follows:
- Customer shrinking attention span and growing desire for instant gratification
- An increasing need for omnichannel experiences, as they’re more convenient
- The need to stand out in a world where there are 334 million businesses
- The growing smartphone adoption.
Variable recurring payments are on the rise
With more than 50% small-to-mid businesses expected to adopt open banking services last year, the need to leverage them has never been more important. The emergence of open banking payments has laid the groundwork for new digital payment options, including VRPs, or variable recurring payments, which are set to become a huge payment trend this year.
VRPs enable authorized payment providers to conduct payments on behalf of customers using permissions granted through open banking agreements and within the boundaries of the deal. This is a better alternative to direct debits or other recurring payment options. A tech company, for instance, could provide a B2B company with a scalable solution with variable pricing based on use.
One main advantage of VRPS, which is in high demand by businesses and consumers, is that it enables near-instant payments.
Currently, you can take advantage of this system only in the UK, but the rest of Europe will likely see its expansion, too.
Blockchain keeps picking up steam
Blockchain is disrupting every industry, from video streaming to agriculture to art. This public, decentralised and distributed ledger has broad applications across them, and will be used in payments in several ways, including:
- Faster payments and real-time verification without any intermediary
- Peer-to-peer payments across borders
- Digital currencies.
Payment innovations emerge as blockchain matures, using its transparency, versatility, and easily accessible capabilities. The global blockchain market is expected to grow at a CAGR of more than 85% until 2030.
Thanks to their transparency and speed, digital currencies facilitate the cross-border payment and remittances transfer. Owing to their decentralised nature, they’re a cost-effective, fast, and frictionless option, unlike conventional currencies backed by central banks. The demand for similar features is growing and this is why you’ll see increased usage of digital currencies.
Peer-to-peer payments are more widespread
Peer-to-peer (P2P) payments have been around for a while now but thanks to the growth of the digital payment market, they’re becoming more popular. The global P2P market is expanding fast due to rising smartphone penetration in payments environment and the industry’s evolving digitalisation.
People are increasingly embracing digital payments and seeing them as an efficient way to make purchases. Customers who would never have imagined using a digital app to pay for their lunch are suddenly paying with their smartphones without hesitation.
Customers expect businesses to provide more payment options in 2023, with the abovementioned ones being the most important.