The past year has been full of surprises for merchants, processors, and everyone involved in the payment processing ecosystem. There have been many unexpected highs and lows, but overall the trajectory of the industry has been positive despite some immense challenges. We saw the evolution of payment channels to handle consumer demands and COVID-19 threats. Governments imposed social distancing rules. Customers of all ages quickly shifted to contactless digital payments. There are many important and emerging trends to watch in merchant services through fall 2021 and into 2022.
COVID19 had a major impact on the economy over the past 18 months. While it isn’t going away anytime soon, we have reasons to be optimistic about the future. A study by JP Morgan showed that about 54% of consumers said that they started using digital payment tools more due to the pandemic. There have been significant developments in the industry, and looking at the trends we have all the reasons to be excited about merchant services in 2022.
- #1. Online Shopping Changed Digital Payments
- #2. Spending and Tracking Tools for Payments
- #3. Increased Use of Biometric Authentication
- #4. Global Rise in Real-time Payments
- #5. New Focus on 5G Technology
- #6. A Steep Rise in Subscription Models
- #7. Crypto Payments Go Mainstream
- #8. Using AI and Machine Learning to Prevent Fraud
- #9. Payment Apps with the Customer Loyalty System
- #10. Peer-to-Peer Payments Merchant Adoption
Here are the top merchant services trends to watch in the fall of 2021 and 2022.
#1. Online Shopping Changed Digital Payments
When we had the COVID-19 first wave, we saw more and more consumers using online services. And businesses had to adapt to the new situation. A study showed that more than 76% of companies agreed that most consumers are now using different payment methods. Digital wallets are now a new normal and people are using them in buying all types of things over the internet. Even those customers who were not comfortable sharing their financial details with businesses have started to shop regularly. More than 18% of the consumers shopped online for the first time during the pandemic. People became confident and habituated to online payments. 38% of consumers said that even after COVID-19 is entirely gone, they will continue to shop online more. This is one of the most encouraging signs for merchant services trends that are going upwards in 2022. It is expected that even after 2022 it will grow exponentially.
#2. Spending and Tracking Tools for Payments
During the pandemic, the businesses saw that consumers had a different paying pattern. They also saw that consumers needed to manage their spending accurately too. With the rise of multiple digital wallets, consumers are getting added advantages. With wallets, the biggest advantage is that they now have a clear picture of how, when, and where they spend their money. This trend was accelerated further due to the COVID-19 pandemic. There are many mobile apps that offer wallets and quick payment options. They also offer you options to manage your spendings and also provide financial advice. With the use of AI (Artificial Intelligence) in future apps, it will be easy to track and control spendings.
#3. Increased Use of Biometric Authentication
The first factor that shook the payment industry is PSD2. The industry will see a significant impact on the growth trends next year. This is also because the time limit to implement the PSD2 strong customer authentication was ending soon. From January 2021, the transactions without any multi-factor verification will be automatically declined. We will witness a significant increase in the use of biometric tools for payment verifications. A study by Juniper Research also predicted that the use of biometric verification for transaction value would be more than $210 billion just in 2021. And the figure will touch $3 trillion by the end of 2023. This trend will increase in the coming years. With the introduction of compulsory biometric verification, people have started to trust online payment gateways. They feel it is far safer now to spend online. Thus the increased use of biometric authentication has boosted the trend in a positive direction.
#4. Global Rise in Real-time Payments
With the COVID-19 pandemic, experts predicted that real-time payments would see good growth in the US. This trend was increasing in 2021 where the value of real-time payments increased by more than 50%. But it did not just limit the growth to the US. One of the studies predicted that real-time payments will grow at a rate of 29% globally between 2020 and 2025. COVID-19 started the trend of real-time payments and will also accelerate its growth in the next year too.
#5. New Focus on 5G Technology
The year 2020 also saw a prediction about the growing importance of 5G and IoT. Where the pandemic accelerated many expected trends, the adoption rate of 5G slowed down. At the same time, far more people were spending much time at home, entertaining themselves over the internet. The number of people who shopped online grew exponentially. And the 4G could have not matched this overload. It failed miserably. 46% of businesses agreed that they lost sales due to slow checkout times. All credit to the 4G technology. The businesses wanted a frictionless in-store experience for their customers. So they now have started shifting their focus to 5G technology to overhaul the store checkout time. The sooner 5G technology is adapted by the market, the better results for merchant services trends in 2021 and 2022.
#6. A Steep Rise in Subscription Models
The pandemic saw many businesses launching their subscription models because of the business need. The customers were also looking for more benefits and they also showed great interest in subscription-based services. More and more customers were planning to increase their subscriptions from what they had earlier, and the age group of 18-34 years was a frontrunner in this trend. Surprisingly, this trend was not limited to digital services only. The famous Pret A Manger coffee chain started its in-store subscription service for coffee in the UK. The subscription model was a success and many businesses will use it and replicate a similar success for their products and services.
#7. Crypto Payments Go Mainstream
Anything that can boost the entire ecosystem of merchant services in the coming years is the use of crypto payments. The fintech companies have been working to find more real-world use for cryptocurrencies. Initially, it was a big challenge to start a system of crypto payments. Big projects like Facebook Libra saw significant setbacks due to regulations. 2021 saw a breakthrough in eCommerce payments. Many big payment processors announced that they would be enabling payments in cryptocurrencies at merchant locations as a priority. This is encouraging and will certainly boost the online payment numbers in the years to come.
#8. Using AI and Machine Learning to Prevent Fraud
AI is comparatively a new technology. But the rate it is growing is astonishing. And the banking sector was the pioneer in implementing this technology. As this technology grows, the online payment gateways will get more secured and robust. For the last few years, online crimes have been increasing rapidly. And the only way to control this is AI implementation that can learn fast and respond with enhanced security. Banking sectors need to expedite the process of implementing AI systems because during the corona pandemic online transactions grew multifold. And fast implementation of AI to protect consumers and merchants is the need of the hour. Although a recent report shows that banks have spent more than $217B for implementing AI. And they plan to implement it further and faster to safeguard consumers from any type of fraud.
#9. Payment Apps with the Customer Loyalty System
Businesses are not only adapting digital payments but also encouraging their customers. They are pushing their customers to use the digital mode for transactions. To do so they offer rewards, discounts, loyalty points, and various other loyalty schemes to their customers. The customers have responded well. Each time they make a transaction, they get benefits. This is a mix of traditional and digital systems. The customer loyalty program has been successful in the past and it will still define merchant services trends in 2022 and beyond.
#10. Peer-to-Peer Payments Merchant Adoption
Another prediction that came true was about the increase in peer-to-peer payments. In the US alone, more than 50% of consumers are now using P2P apps. The use of cash has been declining. The use of apps to send money to family and friends is increasing rapidly. And this will see faster growth in the next few years. But this growth will not be for the US alone. Other regions like South America will also see an explosion in the use of such apps. P2P networks have been positively pushing the merchant services trends since the beginning of the pandemic. And it is expected that this trend will continue to grow upwards for many more years to come.