The ongoing rapid rise of digitization in payments has seen many traditional financial institutions struggling to cater to the increasing demands of their customers.
Non-bank digital-first players in the finance world are winning out over inefficient, inflexible legacy infrastructure, bureaucracy, backlog, and slow-to-market financial offerings.
As a result, we can expect significant changes and innovations in 2024 in both commercial and consumer payments.
While we’ve explored some of those trends in our webinar, The 2024 Payments Glacier, let’s take a look at some additional payments innovations that we predict will shake up the payments landscape in the year ahead.
Value-added services in commercial banking
According to research by Accenture, banks are facing significant competitive vulnerabilities in the commercial payments space – partly due to the constraints of legacy tech platforms, and partly because of legacy mindset.
Fintechs and bigtechs regard commercial payments as an opportunity and have been offering new and value-added services and better payment solutions at a speed and price that have left banks struggling to compete.
The slow development and uptake of new payments solutions due to legacy technology is the biggest challenge for banks in the commercial payments space.
By definition, Fintechs are well equipped with the most current technologies that harness the full potential of cloud services, data integration and AI – and banks are well aware that the key to levelling the playing field is a completely modern digital core.
Value-added services that commercial clients are demanding include real time access to payments data, accounting and tax system integration, integrated dashboards for tracking sales, customers, and products.
These are incentives for banks to look beyond their traditional approach to commercial clients, and to make a mark on the commercial payments landscape in 2024 and beyond.
The continuing addition of new payment types
With consumers’ insatiable appetite for convenience, speed, flexibility and security increasing year upon year, payment trends are evolving so rapidly, it’s almost hard to keep up. Here are some of the fastest expanding areas in the digital payments sector.
It’s estimated that by 2025, the global spend using QR code payments will reach over $3 trillion.
Driven by the steadily rising use of smartphones, QR codes offer plenty of business advantages, including flexibility, cost-effective infrastructure, faster processing and better inventory management.
With QR code payments, either the payer or the payee can initiate the transaction, so a customer can scan a merchant’s QR code to pay, or a merchant can scan a customer’s QR code to request payment.
Another advantage of QR codes over contactless payments is that they can also be used to handle more complex transactions such as incorporating discounts, loyalty points, and other variables.
Buy Now Pay Later (BNPL)
Even before the pandemic, the BNPL payments model was emerging as new and innovative way to pay, particularly amongst Millennials and Gen Zs.
Credit card companies have had to move over and make way for companies including Affirm, Klarna, Afterpay, Sezzle and now PayPal who offer BNPL.
It’s predicted that the number of BNPL users will surpass 900 million globally by 2027 - up from 360 million in 2022 – representing a massive 157% increase. A good chunk of this market is likely to be India, due to the rise in eCommerce usage and the growing demand for international goods available online.
Pay-By-Bank in the US is being driven by converging trends, including the growth of real time payment rails and growing demand from businesses to avoid card processing fees and gain faster access to funds.
The Pay-By-Bank (or Account-to-Account) model entails direct payments through the banking system from one account to another, bypassing the need for checks or cards. It provides consumers with more visibility and control over their payments and allows merchants to initiate real time payments from their customers’ bank accounts.
In Europe in 2024, payment initiation adoption will more than double, driven by the EU’s instant payments proposal. By late 2024, hundreds more banks and payments services providers will launch account-to-account (A2A) faster payments capability.
In Australia, Open Banking payment technology provider, Waave and payments solution provider, Quest Payment Systems, have teamed with Chemist Warehouse to introduce a first-of-its-kind Open Banking checkout option across Chemist Warehouse’s 500 stores. It allows customers to pay directly from their bank account in real time.
The importance of staying current
It's crucial for any payments business to keep track of emerging trends, technologies, international payments standards and regulatory changes. In 2024, every new payments innovation will affect the way financial institutions, organizations and their customers transact.
Observability will be critical to maintaining consumer confidence, winning new business, harnessing innovation, and maintaining success in the long term.
For more in-depth information on what’s in store for 2024, be sure to check out our trends webinar The 2024 Payments Glacier.