Payment processing trends are changing as fast as the entire FinTech does. The COVID-19 pandemic accelerated what has been already in the works. It also created new trends that are clearly visible. If your company is not on board, it will be harder to compete in the upcoming years. What are current payment processing industry trends and how can you react to them?
Payment trends, dominating post-pandemic and the older ones, shape today’s FinTech and e-commerce. These topics are interconnected because today’s post-pandemic payment trends put customers even more in the center. Payment methods go where the customer needs them to be, not necessarily when payment providers see the niche and identify the growth potential. These two can mean the same, but in practice, it’s not the same at all.
A niche is created when a relatively small group of people has a need that is not fulfilled by any current market solutions. Today is dictated by hyper-personalization. That means payment processing trends follow even individuals and focus more on what’s local rather than global. All this is important when designing and building your FinTech app.
Table of contents
- Top payment processing trends for 2022
- PayPal and post-pandemic payment trends – a case study
- Fight the future
Top payment processing trends for 2022
1. Local markets become more important than global processing. Mature markets like the United Kingdom, Australia, or Japan are saturated with solutions. It doesn’t mean that nothing new can emerge on a stage. It just means that payment processing trends indicate a major shift. We now experience a fallback from payments being processed globally.
New markets like Poland grow their economies by fueling the e-commerce sector. The number of new e-commerce platforms and online shops skyrockets, generating growth and the need for more internal processing.
2. Gaming is generating a new payment processing category. One exception for the trend above is related to gaming culture. Video games are now so big that they exceed in the value movie industry. And it didn’t happen yesterday but a few years ago. The industry itself estimates that around 10,000 new video games are introduced to the market every single year. Accenture’s report on video games suggests that the global gaming market is worth at least €250 billion globally.
With increased time gamers spend with one product and new business models, there is a need for swift in-game processing. The business model is called Games as a Service (GaaS) and encourages players to spend more time with one game, steadily delivering content through the game’s lifecycle, effectively prolonging virtual shelf life. Many video games are not treated as a finished product but rather a service that has new content every few weeks and new items delivered even daily. This content can be purchased by players to enhance the experience and, you guessed it, someone has to process payments.
In-game shops and console platforms do the job but with online gaming, we see the rise of solutions like Revolut, for example. This gives players options to buy content in a different country cheaper and play with it with less money spend through the lifecycle of the product.
Also, gaming exploded even more during the pandemic, as Statista clearly shows in its regular data dump. This means even more opportunities and works for payment providers.
3. E-grocery and the development of dark stores are creating a whole new market. E-grocery is rising in many parts of the world, delivering fresh food in hours or even in minutes (see the fourth trend below). Ordering and buying food on the internet and getting it delivered by couriers (like Glovo or Delivery Hero, for example), generates more payment needs. The funds need to be processed quickly to meet the promise of swift delivery.
Dark stores are not accessible by normal people, they don’t accept walk-ins. They are warehouses that only couriers can buy from and where shops store their items. A courier needs to pick up food from a dark store but first make sure that payment has been correctly processed. This puts a new kind of pressure on vendors, especially when e-grocery is growing so fast, and the traffic order is mostly internal (within one specific country).
4. The rise of quick commerce (or q-commerce). This is an even more important factor. Quick commerce is basically a “buy anything and get it in 15 minutes” thing. A customer can order anything (but mostly food items, many of them fresh) and get it delivered by a courier in less than an hour. An industry standard for this service tends to be 15 to 30 minutes, which puts additional pressure on payment providers to handle the traffic.
Although quick commerce is usually bound to one or few cities because applications for this service can only serve so much, plus it’s the matter of dark stores infrastructure, the demands are rising. People are quick when it comes to trusting convenience, so the market expects more applications to pop up. That means more orders and more payments to handle.
5. Shifts in transport payments. Pre-paid passes like Japanese card Suica or Chinese Dalian, Jinan or Nanchang. Transportation apps like ClickBus or OMNY. Finally, mobile parking solutions. All these microtrends build an app the stage for a major phenomenon in transport payments. Users go digital and choose solutions that impact their daily life the most. Again, convenience.
6. Buy now, pay later is aggressively taking over. Yesterday, the buy now, pay later solution was the internet’s domain. Tomorrow it can be wider spread and liked by many companies in… retail. Many retail shops embrace this method of payment because it builds brand loyalty and generates incremental sales. There are many buys now, pay later solutions yet all of them seem to target the main street. They are not aimed to serve the poor but rather those who want to postpone the payment for slightly budget-stretching reasons.
Markets are accelerating this trend, as CNBC reported a few months back.
7. Adoption of artificial intelligence (AI). The benefits are huge. AI can quickly process a massive amount of data, which frees processing vendors’ resources. Companies like PayOp use AI to enhance their services on a daily basis. Another advantage over traditional methods of processing is learning and adaptation. No matter how secure you think you are, hackers can eventually break the wall, get in and get access to customer payment details. AI is constantly learning, making sure it knows all the tricks in the bag.
PayPal and post-COVID payment trends – a case study
Cameron MacLean, the Senior Vice-President of PayPal, admitted in the recent interview for the Polish edition of Forbes magazine, that the COVID-19 pandemic accelerated online payment growth by three to five years.
MacLean sees the tremendous shift in digital payments. Credit and debit cards are being replaced by smartwatches and QR codes. Payments inside given countries (especially in Central and Eastern Europe) are a new priority for PayPal. Cross-border payments are no longer considered that profitable since the market is saturated enough. Especially when many FinTech companies do what PayPal is known for.
MacLean also says that the “buy now, pay later” model is responsible for 20% of transaction volume in Germany, while in Poland for only 6%. That means there’s still room to grow in countries like Poland, the Czech Republic, Hungary, and more.
PayPal can’t effectively compete with Asian giants like Alipay or WeChat Pay that have a phenomenal market saturation and user’s trust. Generated by years of market presence, they just monopolized the sector. Just like PayPal in the first years of its activity. Now the market shifts towards local and domestic payments, with e-wallets and crypto investment options as a cherry on top.
This also is a strong trend that is already looming on the horizon. Many payment processing companies are looking for additional sources of revenue and mere processing isn’t quite enough anymore.
Fight the future
Do you want to enhance your business and grow faster? At Code & Pepper, we can build a digital product and help to scale your company on a technical level. Everything depends on your needs and vision for the future. Payment processing industry trends may proceed mercilessly but you can have an app for it.