Tips To Understand Payments To Remain Competitive In Changing Market

Technological advancements are transforming the global payments industry (including credit card merchant accounts) with every passing day. Geopolitical factors, societal responsibilities, technological advancements, commerce expectations, and capital market resets are some of the most influencing factors behind pronounced sector and regional dynamics. This has been creating new opportunities for disruptors and incumbents alike to claim more market share, develop new solutions, win new and retain more customers, and reshape the competitive chessboard.

Let us explore the key trends in 2024 and beyond that are expected to shape the future of payments when combined with other economic, social, and technological disruptions.

The A2A Transfer Revolution

In 2023, the global payments industry demonstrated its resilience yet again and the future revenue outlook now exceeds pre-pandemic expectations. Growth was massive across all regions, with Asia-Pacific (APAC) and Europe, the Middle East, and Africa (EMEA) both registering double-digit gains.

One of the most transformative trends in the segment of payment processing is the dramatic rise of account-to-account (A2A) payments. This form of payment is already commonly used between businesses (B2B), individual persons (P2P), and governments (P2G, G2P). In the last few months, A2A has emerged as a force to reckon with in person-to-business (P2B) payments.

According to the Global Payments Report 2023, account-to-account payments represented an estimated US$525 billion in 2022 e-com transaction value alone. A2A payments are expected to grow at 11 percent CAGR through 2026. The expansion of apps built on instant-payment use cases—such as bill payment, eCommerce, and point of sale (POS) has exponentially fueled the volume increase.

Digital Wallets

Digital or e-wallets are electronic tools that store the payment information of a user securely, enabling convenient and quick electronic transactions. They can be used for in-store purchases, online shopping, and peer-to-peer transfers through smartphones or computers. This form of secure payment offers a streamlined alternative to traditional physical payment methods with features such as biometric authentication and encryption.

Digital wallets such as Apple Pay are extending their dominance in the segment of payment processing and even credit card merchant account processing, accounting for nearly US$18 trillion in consumer spending.

BNPL

The concept of Buy Now, Pay Later (BNPL) has been nothing short of a phenomenon that allows consumers to buy products and services of their choice and pay for them over time, usually in installments, and sometimes without paying any fee or interest for a promotional period. This form of payment is extremely popular for high-ticket items though it can also be used for everyday purchases such as groceries or clothes.

BNPL represented 5 percent of 2022 global eCommerce spend despite facing interest rate pressure, intense competition, and regulatory scrutiny. It is expected to rise to 6 percent by 2026.

Growth of Credit Card Transactions

The flexibility and convenience offered by credit cards have made them the most preferred payment option for 1.25 billion individuals in 2023. Furthermore, their wide acceptance by both online and offline merchants along with built-in fraud detection and dispute resolution mechanisms are some of the biggest reasons behind the growth and popularity of credit cards worldwide.

Moreover, the evolution of shopping concepts such as digital content consumption, online shopping, and subscription services has also contributed to the popularity of credit cards worldwide.

The Decline of Cash

The decline of cash payments has been going slowly but steadily for years now. The COVID-19 pandemic also brought some changes in payment habits that caused the decline of cash across the world. Today, more and more individuals are opting for digital payments that are more secure, convenient, accessible, and cost-effective.

Expansion of Credit

Today's tech-savvy consumers are seeking more convenient and flexible ways to access and utilize credit. From the integration of credit and debit cards with digital wallets to the humongous rise of alternative credit options such as BNPL, the expansion of credit is reshaping and redefining how consumers shop and pay. Moreover, consumers are exploring choices such as POS financing to apply for and receive credit at the point of purchase. Generally, this form of credit is utilized for larger purchases.

The growing role of Cryptocurrency

The role of Cryptocurrencies such as Ethereum, Bitcoin, Tether, and Solana in person-to-business (P2B) payments is one of the most influencing trends in the world of digital payments and credit card merchant account processing. Today, Cryptocurrency has emerged as a viable person-to-business (P2B) payment option with more than S$15 billion in 2023 global transaction value, which highlights its growing acceptance as a viable and legitimate form of payment.

The primary reasons behind the massive adoption of Cryptocurrency are technological advancements, consumer demand, and the potential to reach new markets. Merchants can explore new markets and opportunities to reach new customers by accepting cryptocurrencies.

Cryptocurrencies can also help merchants in other ways as they are characterized by lower transaction costs compared to traditional payment methods. Merchants can also save on fees and enjoy faster settlement times by choosing cryptocurrencies and bypassing traditional banking channels. Moreover, this form of payment enables cross-border transactions without requiring currency conversion or international banking fees to make international sales more accessible and cost-effective for businesses.

Cross-border payments

Today, new solutions and players are competing with bank and card-based solutions at scale. For too long, cross-border payments have faced challenges such as high costs, insufficient transparency, limited access, and low speed. Now, the pressure is on to collaborate and develop more efficient, faster, transparent, and innovative across cross-border payment solutions with new players emerging in the world of payments along with rapidly evolving customer demands.

It is expected that global payments are expected to increase from US$190 trillion to a massive US$290 trillion by 2030. Governments across the world are now taking concrete steps to enhance the transparency and speed of cross-border payments to reduce exorbitant costs associated with cross-border payments.

By staying updated with these emerging trends and adapting strategies accordingly, both individuals and businesses can swiftly navigate the rapidly evolving payments landscape.

To find out how your business can leverage a credit card merchant account to stay relevant and competitive, please feel free to reach us at WebPays.