Four trends that have shaped fintech and open banking in 2022
Despite increasing worldwide volatility, the Fintech space has been dominated in 2022 by a few clear emerging trends: open banking is transforming payments worldwide; there is a clear uptake in cross-border, global payments; eCommerce and financial services are embracing open banking’s benefits, and last but not least – the return of the QR code in Europe.
1. Open banking is transforming how the world pays
The incredible pace of growth of open banking payments is largely driven by the preferences and expectations of increasingly sophisticated consumers, who demand faster and friction-free ways to pay, and wider choice in the payment methods that are made available to them. Merchants who fail to keep up bear the consequences – as customer loyalty wilts rapidly when faced with friction in user experience. According to a study by Baymard, 9% of consumers have abandoned their carts due to limited choice in payment methods, and a further 17% of consumers abandoned their carts because checkout processes are ‘too long/complicated’ – both huge issues for eCommerce merchants, who are losing significant revenue because of card abandonment at checkout.
Given their speed and simplicity, open banking payments are a silver bullet for this checkout conundrum, and 2022 has been the year this begins to become evident worldwide.
2. Cross-border payments barriers falling one by one
The need for freer, faster and instant cross-border payments is another driving force behind the unprecedented rate of growth of open banking payments worldwide.
We’ve experienced this first-hand at Volt, as we build the infrastructure for a global gateway for open banking payments. By interconnecting real-time payment schemes from various markets and jurisdictions worldwide (which have developed according to varying technological standards), we enable an instant payment experience across borders.
In the UK for instance, open banking is growing at a rate of one million users every six months, and has reached the landmark figure of 6 million users in 2022. Across the channel, the European Commission has announced plans to mandate the full uptake of instant payments in the EU and EEA, which will fuel a renewed wave of innovation in payments.
Further afield, Brazil totals 214.4 million registered users for its Pix instant payments system, a truly phenomenal rate of adoption when we consider it was only launched two years ago by the Central Bank of Brazil. In India, the Unified Payments Interface (UPI) already processes more than 5.3 billion transactions per month.
Real-time A2A payments systems are developing worldwide, with over 60 countries looking at adopting legislation to this effect. This is especially exciting in emerging markets, which are less hamstrung by their legacy banking systems, and are arguably leapfrogging the ‘card stage’ and directly building online optimised payments.
This tsunami of payments innovation is moving in one certain direction – businesses need to prepare for the global uptake of open payments.
3. Open banking is becoming key for eCommerce and financial services
Open banking payments are now a core element of eCommerce strategies, especially for global merchants, who need to optimise their processes, improve cash flows and ensure a safe, secure but frictionless customer experience.
Given the inflationary pressures merchants must fight, instant access to funds is a huge plus for merchants; and for consumers, who are battling cost of living concerns, control over their finances and the freedom that instant payments bring is a win they are increasingly learning to appreciate.
This is driven by Fintech and open banking innovators, like Volt, creating products and functionalities that now go beyond the core capabilities for Account Information Services and Payment Initiation Services – open banking is a blueprint for how open finance and open data can be transformed to the benefit of consumers.
4. The borders between online and in person payments are blurring
The pandemic has triggered the return of QR code payments in Europe, which enabled online payments to move into the physical world. Consumers are already paying online with curbside pick-up, or alternatively paying in-store with QR codes. In 2023, the line between physical and online payments will become more blurred, shaped by the expectations and lifestyles of today’s hyper-connected consumers.
