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Top Payment Trends Shaping 2023

The digital payments industry is undergoing immense transformation fueled by rapid technological advancements and growing consumer demand.

In fact, the digital payment market is expected to be worth USD19.89 trillion by 2026, representing a compound annual growth rate (CAGR) of 24.4%. Smartphones, QR codes, digital wallets, and a growing number of payment apps have enabled this growth, making payments almost invisible and providing immersive, seamless, and frictionless payment experiences.

We’ve put together the following trends that we predict will shape the payments industry in 2023.

Read straight through, or jump to the section you want to read:

Trend 1 – Peet-to-peer payments (P2P), Real-time payments, and Open Banking

Trend 2 – Social commerce and Metaverse

Trend 3 – Buy Now, Pay Later (BNPL) for B2B

Trend 4 – Cross border instant payments

Trend 5 – Privacy, security and biometric opportunities

Trend 6 – Data standardization and interoperability via ISO 20022

Trend 1 - Peet-to-peer payments (P2P), Real-time payments, and Open Banking

Physical, digital and virtual worlds are merging. And technology is expanding to meet evolving customer expectations–across all channels. In 2023, we’ll see increased innovation and adoption of P2P, real-time payments and open banking to meet this demand.

Peer-to-peer payments (P2P)

Peer-to-peer (P2P) payments have existed for a while now but are quickly becoming more widespread and popular with the growth of the digital payments market.

Globally, the P2P market is experiencing accelerated growth thanks to increasing smartphone penetration in the payments landscape and evolving digitalization of the industry. According to a September 2022 market report, the global P2P market is forecast to reach a market size of $9,135B (USD) by 2030.

As mentioned, smartphone usage is a driving force behind P2P payment growth. Insider Intelligence reports that the UK is expected to reach 18.1M mobile P2P payment users in 2022, up from 17.1M in 2021.

One hurdle P2P sites may need to overcome is that all P2P sites operating in the EU need to be licensed CSPs as of November 2022. However, this is a good thing; as P2P payments become more regulated, this can help reduce payment friction and boost payment speed even further.

Next gen Real Time Payment schemes

 New technology, regulatory pressure and customer expectations are fueling the growth of real-time payments. Compared to traditional processing, real-time payments are faster–for consumers and businesses.

  • New payment rails enable faster, more efficient real-time payments for business-to-business (B2B) transactions, which will continue to have a transformative effect on businesses.
  • The global implementation of the ISO 20022 messaging standard has a positive effect on real time cross-border payments and enhances security and compliance
  • The increasing automation of treasury functions such as risk management, reporting, and forecasting, provides CFOs access to richer, more up-to-date data thanks to real time processes.
  • New instant payment schemes, such as the US FedNow payment service launching in 2023, provide customers with more next-generation, innovative, instant payment offerings. Ultimately, we expect to see banks taking strategic steps towards infrastructure changes to ensure enough flexibility to cope with next-generation, real-time payment types.

Open Banking

Open banking allows third parties direct access to consumers’ banking accounts and financial data upon consent from the consumer. This access creates more opportunities for financial innovation.

With 71% of small-to-mid-size enterprises expected to adopt Open Banking services by 2022, it has never been more important to begin leveraging them. 

The rise of Open Banking payments has led to many new digital payment methods. One such method is variable recurring payments, or VRP for short, and it’s bound to become a huge payment trend in 2023.

VRPs utilize the permissions granted via Open Banking agreements to allow authorized payment providers to make payments on the behalf of customers within the boundaries of the agreement. This is considered a better alternative to other recurring payment options, such as direct debits.

For example, a tech company could offer a B2B company a scalable solution that can vary in price according to use. When creating a payment agreement for this solution, a VRP could be used to automatically carry out these payments within the limits of the arrangement.

One key advantage of VRPs is that they enable near-instant payments — something that is in high demand with customers and businesses alike.

Currently, this is only available in the UK, but we’re looking forward to its future expansion across the rest of Europe.

Trend 2 - Social commerce and Metaverse

Social and Live commerce

Social commerce allows customers to make a purchase immediately and seamlessly within social media platforms such as Facebook, Instagram, Pinterest and TikTok. Live commerce lets customers buy a product they see on screen during live-streaming events.In 2023, we expect social and live commerce to accelerate.

Metaverse

A growing phenomenon, the metaverse offers businesses new opportunities. Early adopters are creating immersive experiences that will deepen their relationships with consumers. The metaverse also creates a new channel for commerce. We expect two models to drive commerce initially:

  • Direct-to-avatar (D2A) commerce: When you enter the metaverse, you create an avatar–a virtual you. Businesses can then sell virtual products like clothing to your avatar.
  • Virtual-to-physical commerce: Consumers can buy products while in the metaverse, then exchange them for physical products in the real world.

Just as they move effortlessly from the physical to the virtual worlds and back again, consumers will expect a seamless, integrated payment experience. Think of it as an extension of card-not-present commerce.

Trend 3 - Buy Now, Pay Later (BNPL) for B2B

Buy Now, Pay Later — or BNPL for short — is a type of installment loan in which a financial service provider enables customers to pay for a product or service in several small, interest-free payments.

While the customer is given greater financial flexibility, the business offering the product or service does not miss out on revenue. A BNPL provider will often pay out the business for the full amount of the purchase, handling the installment loan payments directly with the customer.

As BNPLs become more widely regulated, this also opens up new business opportunities beyond the traditional B2C use case. For instance, for B2B companies by offering more secure and trustworthy services. One of the key advantages of BNPLs for B2B companies is the ability to offer or make big-ticket purchases without having to pay the full amount upfront, enabling BNPLs to serve as investment-like tools. The surge of BNPL in the B2B sector, on top of its popularity in the B2C sector, makes it one of the fastest growing digital payment trends.

Trend 4 - Cross border instant payments

Cross-border instant payments offer businesses and consumers alike the opportunity to experience real-time payments by connecting to financial institutions and systems in two or more countries instantly.

According to a 2020 Juniper Research report, instant payments where funds are settled in less than 10 seconds are expected to account for 9.3% of all B2B transaction volume in 2022. The report also notes that blockchain technology is likely to play an increasingly prominent role in the cross-border market thanks to its ability to offer greater efficiency and transparency.

However, much development and innovation are still needed in the cross-border instant payments market.

A November 2022 report from the International Monetary Fund (IMF) states that cross-border payment connections between two countries must be tailor-made, which takes “time and significant efforts” to accomplish. The IMF highlights that multilateral cross-border payment platforms are a promising path that can potentially deliver a “transformational impact” in the cross-border instant payment industry. The EU has also acknowledged this trend, rolling out a new proposal in October 2022 to amend existing regulations regarding cross-border instant payments.

Trend 5 - Privacy, security and biometric opportunities

In 2023, there will be an increased emphasis on cybersecurity in payments, driven by the expansion of eCommerce, non-cash payments, and cyber threats. According to a 2020 report by Argus Research, cybersecurity losses could reach USD10.5 trillion by 2025.

A 2021 publication by market research company Nilson, highlighted chargebacks as a major issue, where fraud is predicted to cost the debit and credit card industries more than USD400 billion in damages over the next ten years.

The focus on privacy and security will increase. Consumers already use their finger, face or iris to unlock their smartphones or speed through airport security. That’s biometrics in action. And now, consumers can use biometrics to authenticate payment transactions. Companies are building solutions to authenticate payments using several unique biometric markers. This trend is gaining traction, and we expect wider adoption in 2023.

“People want faster payments or don’t want to think about payments at all anymore—biometrics is a really easy way for us to do that.”

Trend 6 - Data standardization and interoperability via ISO 20022

ISO 20022 will be rolled out globally in March 2023. With it comes an increased ease to cross the divide between Retail and Wholesale payment environments, allowing for further interoperability between domestic and international payment systems.

This means financial organizations will have the ability to create products such as real-time international payments as well as other bundled financial products to further support more immersive, seamless and frictionless payment experiences.