The digital payments market is evolving at a speed never seen before in the UK and worldwide. What trends and technologies will be prevalent in 2022?

In the last couple of years, the world witnessed an increased use and smoother adoption of alternative payments. The natural progression of digital payments’ use has been evident and was encouraged by worldwide digitalisation, and sped up even more due to the unique conditions created by the pandemic, which introduced many challenges that saw people turning to innovation and adopting new technological solutions. Many merchants had to implement drastic changes to the payment options to meet the changing needs of their customers. Let’s have a look at the potential solutions to be integrated and implemented in 2022 that customers can take advantage of.

First of all, in order to back up the statement regarding the digital payments sector’s growth, here’s some important data regarding digital payments in the UK, where the Ecommerce transaction value and mobile POS payments in 2021 was reported to have reached £255,819 million and is expected to reach £305,738 million in 2022 (+16% YoY). The UK for a long time has been ahead of all Europe and in the leading positions in the world in adoption of digital payment tools, and is known globally for its resilience and adaptiveness when dealing with innovations that carry a particular weight in the digital payments arena. This is further confirmed by the fact that as of 2022 the UK is in the 3rd place worldwide right after China and the US in transaction value via digital payments. Let’s examine some of the technologies and trends that are promising to be the hot topic of 2022 and beyond.

Buy Now Pay Later. This payment method proved to be a big hit worldwide and in the UK during the pandemic, accounting for 6% of all Ecommerce transactions in 2021, and is forecast to grow 50.5% in 2022, according to the Research and Markets’ BNPL survey. Buy Now Pay Later solutions met with success across the world and, in particular, in the UK, due to the security given by interest-free loans in the economic uncertainty, especially in high-volume and high-value purchases. This is why so many companies that offer BNPL solutions gained popularity and grew economically in 2021, such as Klarna, Laybuy, Openpay and others.

There are two forms of BNPL that can be integrated into Ecommerce platforms as of today: financing (consumer credit), and payment in tranches directly from the credit card, that was implemented by Klarna, ClearPay, Laybuy and recently PayPal. However, in 2022 and 2023 some new regulations regarding security, accumulating consumer debt, rising interests and more meticulous reporting might slightly stagnate the growth of the BNPL market and necessitate the sector to mature.

Blockchain and cryptocurrencies. 2021 witnessed quite a buzz and a resurgence of interest in blockchain and cryptocurrencies, that first occurred in 2017, and even though the decentralised technology of the blockchain is quite promising and is being heavily studied and invested in by banks and multinational companies, cryptocurrencies remain a speculative alternative payment due to an incredible volatility of exchange rates. Crypto is also a grey area due to its illicit uses, however, the same can be said for such payment methods as cash and pre-paid cards.

Another concern around this payment trend is the elevated energy use for mining and trans- actions, considering pressing climate change concerns worldwide and, therefore, invest- ment in sustainability, blockchain still has many questions to answer on its ESG compatibility. Nevertheless, this technological phenomenon might revolutionise the banking and payments world in the next 5 to 10 years and, therefore, is impossible to ignore, and will be gaining even more attention from banks and companies around the world in coming years. Bitcoin, for instance, already has received support on the network of the payment giants, such as Visa and Mastercard in late 2021, as reported by Forbes. And the list of the companies that accept crypto keeps growing, from PayPal to Microsoft and Starbucks, and the list of online retailers in the UK is already at almost 200.

Payment Orchestration and Smart Routing. Payment Orchestration is a very new concept in the world of payments but is already gaining popularity and adoption by the biggest players in Ecommerce, thanks to the implementation of dynamic routing technology, based on advanced AI and integration of multiple payment partners within one platform. The advantages of this new solution are:

  • Increased conversion rate due to optimised payment experience;
  • Reduced failed transaction rate thanks to dynamic routing, aka redirecting transactions to different PSPs depending on the performance, geography;
  • Great effectiveness for international players for an automatic conversion of currencies;
  • Reduced time to market of new merchants’ solutions and faster scalability;
  • Reduced fraud thanks to machine learning and transaction risk analysis, when applied;
  • Automatic reconciliation, reporting and backup system that saves time and gives control to the merchants.

One of the trends in payments in 2022 is the use of artificial intelligence and machine learning in fraud prevention.

Among the downsides of payment orchestration platforms are the short time on the market, so not all the solutions are optimised and ready to use, and there continues to be under development, and most companies that offer payment orchestration started to do so just very recently. Another downside is that even though the costs are optimised for large-scale retailers, the costs might not prove sustainable for smaller businesses.

If you want to learn more about Axerve’s approach to satisfying the evolving payment needs of its customers worldwide regarding speed, safety and frictionless payment experience, as well as exclusive internal Transaction Risk Analysis data and how it improves a failed transactions rate, download Axerve’s whitepaper “New technologies and trends in digital payments in 2022”, and read Axerve’s insights into the world of payments.

Whitepaper: New technologies and trends in digital payments in 2022
Blog: Insights
Video: Benefits of Payment Orchestration
Homepage: Axerve

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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.