Payments Top Trends for 2023

We know what 2022 looked like, with a lot of focus on infrastructure modernization, API depth, and advanced data analytics. But what is this year shaping up to look like in the payments world?

Top Trends for 2023 - Capgemini Report

• Customer Centricity - incumbent banks are struggling to meet B2B demands/Buy Now Pay Later ( BNPL ) supply chain financing. Embedded finance is on the rise.

• Creating and Enabling New Values - ISO20022 creating new value streams and driving governments to discuss CBDC as a viable alternative to Crypto

• Changes in Industry Dynamics - pick&mix technology architecture helping Banks to move , real-time cross-border payments for increasing cash-flow and improving liquidity, and business focus on RTPs, interoperability and API enablement.

• Business Resilience - How FIs are helping the supply-chain finance issues of SMBs

• New Horizons - Card tokenization is emerging as a critical tool to combat cybersecurity threats.

Trend 1: B2B BUY NOW PAY LATER (BNPL) PICKS UP MOMENTUM AMID POST-PANDEMIC MACROECONOMICS

Why BNPL is gaining significant advantages over traditional credit methods:

B2B Buy Now Pay later will continue to grow albeit very much with a risk-based approach in-mind. Either way BNPL will take one of two forms:

1. A point of payment option embedded in the buyer's digital bank account, or

2. An invoice financing option for suppliers seeking immediate payments

Trend 2: EMBEDDED FINANCE PROVIDERS LEVERAGE CUSTOMER DATA AND ACTIONABLE INSIGHTS TO UNLOCK NEW USE CASES

Embedded finance offers users contextual, seamless experiences thanks to platform ecosystems that leverage comprehensive customer data tot develop relevant new products and services

Embedded finance deliver substantial benefits to all its stakeholders:

Embedded finance boosts CX, reduces costs for customers and merchants while offering customers better access to services, lower risks, increases lifetime value and strengthens average revenue per user, fosters stickiness and customer retention and fuels growth. Monetizing and leveraging financial services is another point in favour of Embedded finance.

Trend 3: GLOBAL ADOPTION OF ISO20022 OPENS DOORS TO DATA MONETIZATION

MX-ISO 20022 will prioritize structured data, traceability, and transaction processing speed across the value chain.

ISO 20022 can help FS's boss productivity and security while developing new data-based revenue streams

MX adoption will automate the payment process to drive straight through processing (STP) and significantly reduce transaction costs. MX formats will enable end-to-end transparency and interoperability to improve settlement times and reduce payment delays.

Trend 4: CENTRAL BANKS GEAR UP TO PILOT AND IMPLEMENT CBDCs

Central Bank Digital Currency (CBDC) aims to work in tandem with traditional payment assets, offering real-time processing, amplified transparency, and broad societal reach

The benefits of rolling out CBDCs include increased end-to-end traceability across the payments value chain and a reduction in net transaction costs, benefitting lower-income households. CBDC is touted as a means to improve payment processing and settlement time.

Trend 5: COMPOSABLE ARCHITECHTURE CREATES COMPETITIVE ADVANTAGE EFFICIENCIES

Payments providers can create layers of services and capabilities on a composable, API-powered canvas.

Compostable architecture enables banks to transition from legacy systems to independent and cost-efficient best-in-class IT systems. Composability also facilitate cloud migration and adoption of technologies that enhance innovation, agility, scalability, and freedom to choose products from multiple vendors.

Trend 6: REAL-TIME, CROSS-BORDER PAYMENT RAILS WILL BOOST THE SPEED AND VOLUME OF REGIONAL TRADE

Improved fund liquidity and transparency will bolster trust in cross-border transactions.

RTP will have a big impact on cross-border payments, with more active participation from global infrastructure providers, card network operators, and central banks. Increased liquidity and improved cashflows in cross-border trade as banks disperse funds in real-time, unlike the traditional process. Cross-border RTP will also reduce costs associated with transaction fees and currency exchanges, an will help SMBs improve their margins.

Trend 7: AN END-TO-END ECOSYSTEM APPROACH SIMPLIFIES PAYMENT HUB MODERNIZATION

Cloud based digital payment hubs optimize costs and customer experience while allowing new players to enter the ecosystem

How are banks and payment service providers prioritizing their IT budget spend?

Banks and PSPs can boos speed to market, agility and innovation through complementary payments ecosystem, Cloud-based SaaS models will gain momentum for providing access to a boroader range of products and services at lower costs.

Trend 8: PAYTECH INNOVATION AND ECOSYSTEM PARTNERSHIPS FOCUS ON REVAMPING SMB PAYMENTS

Payment service providers, including banks, are betting big on innovative payment technologies with the right mix of ecosystem partners to boost SMB engagement and loyalty.

Critical indicators catalyse SMB to restructure their payments value chains:

Banks will leverage B2B partner networks to deepen existing customer relationships, strengthen client retention, and sustain growth by offering robust systems and quicker market time. More streamlined B2B cross-border payments value chain as intermediary correspondent banking networks are eliminated and global-multi-currency payment solutions emerge.

Trend 9: TOKENIZATION - A MULTI-PROLONGED APPROACH FOR SCALABLE AND SECURE CARD PAYMETNS INFRASTRUCTURE

Tokenization involves all major payment ecosystem players - aiming to make card payments safer. But how will card tokenization affect payments ecosystem partners?

The payment card tokenization trend will enhance digital payment security for issuers, merchants, acquirers, payment processors, and stakeholders. Visa reports that card transaction fraud has shrunk by 28% thanks to tokenization and its overall transaction approval rates rose by 3%, signifying a reduction in false negatives - a boon for card payments customer experience.

Trend 10: ECO-FRIENDLY CARDS, DIGITAL PAYMETNS, ADN CLOUD-BASED PAYMENTS HUBS WILL BOOST SUSTAINABILITY

Consumers' sustainability awareness and payment firms' strategic net-zero business goals drive earth-friendly initiatives. Non-cash transactions promote sustainability in different ways:

Sustainability payments are pivotal to achieving net zero and building innovative eco-friendly offerings that retain and attract environmentally conscious consumers. As markets transition to cashless economies, payment transaction will be more sustainable. Banks migrating to cloud-based solutions will generate 95% fewer carbon emissions than on-premises systems.

Download the full Capgemini Payments Trends Report

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