2021 Digital Payment Trends: More mainstream adoption of Buy Now Pay Later, APIs and Neobanks
Banks and payments providers will need to act quickly to adapt to changing market trends, global payments solution provider Accuity.
Here are the four key payment trends that will drive change in the year ahead:
- The point of online purchase will become increasingly crowded for payment service providers. 2021 will be the year of digital payment experimentation as options to pay will increase. Large online marketplaces will expand ‘embedded finance’ to create branded payment infrastructures. Buy now pay later options will expand to the point where they represent a genuine alternative to bank-issued credit cards.
- Payment service providers will compete to handle Strong Customer Authentication (SCA) with the least checkout friction in Europe. Merchants need to find ways to speedily get consumers through a checkout process with added security and reduced points of friction. Biometric authentication will be a way for businesses to add security but ensure consumers don’t abandon items in their shopping cart because the process takes too long.
- Neobanks will go niche with products targeted at customer segments. Pressure for profits should push upstart banks to focus more on business accounts, who are more used to paying account fees than retail accounts. Expect more banking products focused on children’s accounts with a growing number of neobanks planning to introduce a younger generation to digital payments. With travel restrictions set to continue, neobanks will need new features to provide value as free overseas cash withdrawals and no foreign transaction fees may continue to have limited appeal
- Traditional banks will use APIs from fintech providers to strengthen their payment services. Open banking initiatives will continue to be a driver for banks and financial services to migrate their systems and data to new cloud-hybrid architectures, with the momentum set to continue in countries that have established strong open banking initiatives in 2020.
Mark Bradbury, Head of Payments, Accuity, comments “In 2020 we have seen an acceleration in the transformation of digital payments. The outbreak of the pandemic led to a huge decline in cash and hastened the shift towards digital payments for both consumers and businesses. Banks and payment service providers have been forced to innovate at a much quicker rate.”
“Technical enablers such as Banking as a Service platforms and payment APIs have lowered barriers to entry for payments. At the same time an ecosystem of financial institutions that is willing to share data via API has emerged. For banks and payment service providers, 2021 will be another test of the industry’s ability to respond to changing demand, and as the market continues to become even more saturated, it is vital for each to clearly demonstrate their unique customer value proposition.”