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FIS’ annual survey of global payments says the rules that once limited those participating in money movement have been rewritten as payments continue to be redefined, revisited and reimagined. In Europe, this includes buy now, pay later (BNPL) entering the mainstream, and continued leadership in real-time payments and open banking.
FIS and subsidiary Worldpay has published a review of the latest trends transforming the global payments ecosystem as part of its 2022 Global Payments Report. The long-running annual report, which was previously published by Worldpay before its acquisition by FIS, offers a useful guide to some of the key payment developments around the world, arguing that “the traditional lines between banking, payments and commerce have all but dissolved”.
Among the standout focal points this year include the growth of super apps in Asia, crypto and central bank digital currencies (CBDCs), embedded finance and key developments that are transforming the payments landscape in Europe.
Global trends
Super apps first emerged in Asia as powerful disruptors and innovators, transforming how consumers shop, pay and connect with brands. This is largely due to the fact that this technology came into these markets at the same time as inexpensive mobile phones became largely available for the masses, addressing key issues such as financial inclusion.
“Super apps are not just a glimpse into the future — they’re the living future. From Paytm in India to Zalo in Vietnam, the world will continue to look to APAC for leadership in super app best practices,” the report stresses.
Another important trend shaping the global payments landscape is embedded finance, which is disrupting the traditional lines between financial and non-financial companies, it says.
While embedded finance enables financial institutions to expand their distribution channels, it creates a new type of competition and requires a shift in thinking from financial institutions.
“Financial institutions still expecting all of their business to come to them directly will miss out. They have to be able to provide the services but also make their services available for others to sell. There’s a real marketplace there,” the acquirer advises.
Although regulatory responses to cryptocurrencies vary greatly around the world, FIS notes that consumers have become more comfortable with the digital asset and large merchants are increasingly moving toward cryptocurrency acceptance.
“The world watches what China, the United States, Europe and the United Kingdom does. We’ve seen this before when new payments instruments have been introduced. There’s been uptake, and then regulation follows to make sure it doesn’t create any instability in the financial markets. This digital asset category will be no different,” said Aman Cheema, FIS senior vice president for global real-time payments, strategy and innovation.
All eyes on Europe
In Europe, the significant growth in BNPL adoption, the growing importance of open banking and overlay services on real-time payments systems continues to drive innovation, notes the report.
“As multiple payments solutions are causing simultaneous and overlapping disruption, Europe can be considered an early indicator of global payments trends.”
BNPL has grown “from fringe upstart to the very centre of the mainstream” of payments options in Europe, the report notes.
With BNPL accounting for more than 8 percent of Europe’s regional e-commerce and nearly 2 percent of regional POS transaction value in 2021, the value of BNPL transactions in Europe exceeded more than twice the value of any other market.
The three top e-commerce markets for BNPL are all located in Europe. In Sweden, which is home to Klarna, one of the first and largest providers, BNPL represented one-fourth of e-commerce payments (25 percent), closely followed by Germany (20 percent) and Norway (18 percent).
“Consumers are clearly embracing the ease of use and flexible financing BNPL offers. Now it seems like every merchant is looking to offer BNPL to satisfy growing demand,” said Peter Wickes, FIS general manager, EMEA, Enterprise.
“The bigger companies are prepared and may even welcome appropriate regulation, whereas smaller providers may find regulation burdensome.”
As many new entrants, as well as established market players, entered the BNPL arena in 2021, the market has become increasingly saturated.
“There are now so many companies that offer BNPL services, some form of consolidation in the market feels inevitable,” said Wickes.
“Merchants need help to make decisions about the number of payment methods they actually need to offer. There’s no need to offer six BNPL options on their payments page when two will more than suffice.”
Nonetheless, the market seems to react quickly to this opportunity with only last week ACI Worldwide announcing that it has launched a global BNPL interface that gives access to more than 70 providers via a single integration.
Meanwhile, scaling up also creates a challenge for larger BNPL providers.
“That may well supplement organic growth with acquisition of targeted competitors in local markets, where it’s going to take them one or two years to expand,” said Wickes.
Building on real-time payments
While payments modernisation is taking place everywhere in the world, Europe has traditionally been a leader in real-time payments.
With more than half of the world’s real-time payments enabled countries, Europe “continues to be positioned as a global leader and centre of excellence and innovation”, according to the report, even if the volume of real-time payments on the continent have not quite reached the lofty ambitions of its architects.
Building on its instant clearing and settlement of payments infrastructure, Europe is now moving towards offering innovative overlay services on top of the existing payment rails, which requires many of these early adopters to adapt once again.
“The European story on real-time payments is one of innovation and renovation. Europe continues to wholeheartedly embrace real-time payments,” the report says.
The modernisation efforts are largely powered by the European Payment Council’s SEPA Instant Credit Transfer (SCT Inst), which developed services like Request to Pay in 2021, as well as forthcoming availability of an API open gateway.
Meanwhile, the UK is also working on the overhaul of its payment infrastructure through the development of the New Payments Architecture (NPA), while the P27 initiative in the Nordics is leading the way to create a cross-border, multi-currency instant payment system.
“All eyes are on Europe’s continuing innovation in real-time payments solutions,” the report says.
“I think you are going to see the availability of real-time payments becoming a requirement across the whole ecosystem — not just for real-time payments going out but also coming in,” the report quotes Wickes as saying.
“The ability to transact instantly will evolve from innovative convenience to baseline expectation among consumers and merchants alike,” he predicts.
Open banking hanging on
Although there is a big focus on open banking in Europe, the report notes the material movement toward open banking that many had predicted has not yet come into being.
“Ultimately, the success or failure of open banking will come down to consumer choice, and whether consumers see open banking as a payment method that creates a positive experience and provides additional benefits that surpass other options,” according to Wickes.
