Endava has revealed its top predictions for the payments industry in 2023. According to Endava, economic uncertainty, the increasing payments complexity, and the evolution of marketplaces will play a vital role in the payments industry.
Nick Curran, Head of Endava Middle East and North Africa, explained, “In a digitally empowered payments landscape, consumers are rapidly driving change in technology and engagement models. Organizations across the industry are attempting to improve their agility and level of user personalization while maintaining profitability.”
Inflation will be a catalyst for new models
As consumer cashflow reduces, we will not only see a surge in the use of credit and products like Buy Now, Pay Later (BNPL), but we’ll also see new industries adopting subscription models. Consumers will have the option to spread the cost of products and services for everything from fresh groceries to car subscriptions inclusive of embedded insurance and maintenance services. However, although BNPL will continue to be popular, it will come under pressure due to fluctuating interest rates. As a result, the B2B sector will see a boost in cash advance and other models to help businesses. Beyond BNPL and subscription models, more businesses will move into the foreign exchange and money movement space and embedded models will increase – a development that will require complicated B2B2C and C2B2B models.
Increasing payments complexity will lead to greater outsourcing
The growing regulatory burden in the payments space and the need for solutions to support it will drive more businesses to seek outsourced support. Non-payments companies across multiple markets now need to manage complex requirements concerning reconciliation/billing and manage fraud to de-risk exposure. For the low to mid-end of the market, this is likely to mean adopting plug-and-play solutions. Larger organizations will have to manage increasingly strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, which reverses into models like embedded lending, finance and payments. Traditional payments vendors aren’t exempt from change either – they will also need to evolve to support new models.
The evolution of marketplaces
Gateways have historically been the point of connection for merchants, either directly or via the marketplace of connectors to shopping and other platforms. However, the customer ownership is changing, with a move from Gateways to Gateway acquirers creating a rise in orchestrators. A major shift in this segment is the ongoing growth of marketplaces, which will mean that both direct entrants and marketplace technology will grow in tandem. As barriers to marketplace entry mount up (such as regulatory considerations, managing incoming/outcoming payments and tax and logistics), we’ll see a continued uptick in marketplace payment services providers to tackle challenges on a global scale.