Top 7 Payment Trends to Watch in 2023 and Beyond
Payment processing has never been more complex than it is today. This is, in part due to the abundance of options, and the continual advancement of technology.
The payment processing ecosystem continues to evolve with new capabilities, and businesses must stay up to date on trends to provide the best customer experience possible.
With multiple payment channels available to merchants, deciding which to accept can be a daunting task. Digital payments are leading the way in the payment industry with continuous innovation and security measures that modernize the shopping experience, both in-person and online.
To help you make sense of the payments landscape, this post sheds light on 7 payment trends for businesses to watch in 2023 and beyond.
1. Going Cashless Leads the Way for Digital Payment Trends
Common cashless transaction types include credit and debit, mobile wallets, ACH transfers, and any eCommerce transaction. Cashless transactions are expected to increase tremendously in the coming years, and businesses need to be prepared.
Going cashless is part of a larger revolution in the payments industry where processing companies and businesses seek to evolve their practices. Customer demand for digital transactions and the expectations for payment options to suit their needs is a driving force for the evolution of payment processing.
2. Mobile Wallets Become Table Stakes
Mobile wallets were already commonly used in recent years thanks to their convenient, contactless, and secure nature. The use of digital wallets is popular for in-person transactions through the near-field communication (NFC) technology, and eCommerce transactions.
Users can store their debit and credit cards with an end-to-end encrypted digital wallet and make secure transactions easily. Gone are the days where retailers can simply accept cash, and digital wallets provide a safe, secure, and seamless customer experience at the point of sale.
Though mobile wallets may not be universally used like traditional payment options, more and more people are leaving their residence without their analog wallets.
Providing multiple payment options is now table stakes for any business accepting secure payment from customers, and digital wallets will continue to grow as a payment trend.
3. Tap-to-Pay with Contactless Credit Cards
Another trend that’s showing rapid growth and popularity? Contactless credit card usage.
More retailers are offering this as a safer payment solution and providing information about how contactless payments work is important to educate wary customers. Contactless card transactions typically process faster than inserting the chip, and also incur less wear and tear on the card. Additionally, contactless cards are more secure than swiping a card’s magnetic strip and are processed with end-to-end encryption.
Though not all banks issue cards with contactless capabilities, there are currently over 190 million contactless Visa credit cards, with 300 million total expected to be in circulation by the end of 2021. Additionally, most major card issuers are now sending these out by default and replacement cards are frequently getting this upgrade.
American Express states that most of its products have contactless technology, and many other financial institutions such as Bank of America, Capital One, and Chase have several options available.
Combined with mobile wallet tap-to-pay adoption, businesses should consider accepting contactless payments, as this payment trend continues to be widely adopted by consumers.
4. Paving the Way for More P2P Payments
Peer-to-peer payments (P2P) are more commonly known by their app names. Venmo, Cash App, PayPal, Google Pay, Apple Pay, and Zelle are popular apps that allow users to transfer money from linked bank accounts or credit and debit cards to another user.
While this is often used by consumers to transfer money between individuals, some businesses can easily implement this payment method to provide a more seamless experience for their customers.
Although P2P payments are not suitable for many businesses, some do offer pay-to-merchant (P2M) options, with PayPal leading in this space and accepted by many retailers. However, there are some drawbacks for businesses seeking to offer P2M.
These payments may take longer to process, incur larger transaction fees, and may be less secure than other payment methods. This method may not be suitable for all businesses, but for some, the streamlined payment experience for the customer could be a deciding factor.
5. Buy-Now-Pay Later is Gaining Popularity
Buy-now-pay-later (BNPL) is a payment option that allows customers to spread out their purchase payments in a way that resembles a personal loan. The terms of these loans vary, with some including interest, and others dividing the purchase into multiple interest-free automatic withdrawals.
Other differentiators of BNPL payment services include whether there is a hard or soft pull on the customer’s credit, late fees, and payment cadence, and loan duration. One example of a BNPL merchant partnership is Amazon’s partnership with Affirm, which allows customers to use this service on purchases of $50 or more without a credit check or interest on the purchase.
These transactions are different from typical credit card transactions and can sway customers who are on the fence to make a purchase. According to McKinsey, BNPL was used as a payment option for 30% of respondents, and 29% of people report that they would have made smaller purchases or not purchased at all without BNPL.
Depending on the average price point and shopping habits of your customers, adding a buy-now-pay-later option could lead to significant increases in business, especially around prime shopping seasons. While it may not be suitable for every business, this payment method is certainly making waves and has several providers available for merchants to consider.
6. Cryptocurrency and Cross-Border Digital Payments
The use of cryptocurrency for payments has increased in recent years, with about 21% of survey respondents citing this as their primary reason for entering the cryptocurrency market. Cryptocurrencies are known to be volatile in their value, but the investment potential is the leading reason for ownership, with 43% of survey respondents citing this as their motivation for holding cryptocurrency. Major companies such as Microsoft, Tesla, Expedia, and WeWork now accept cryptocurrency payments. This digital payment trend is one to keep an eye on, as the usage has evolved to be more mainstream.
There is also a rising trend in cross-border payments using cryptocurrency. These transactions often process faster and automatically convert to local currency, creating a seamless customer experience. PayPal has one of the most notable offerings for cross-border transactions, allowing customers to buy, hold, transfer, and use multiple cryptocurrencies in transactions around the world.
7. Security Through AI and Machine Learning
Given the amount and variety of fraud retailers face, businesses must rely on AI and machine learning to enhance their security measures. AI and machine learning monitor for real-time fraud indicators and decline transactions as appropriate, and provide insights into trends in fraudulent transactions.
Payment processing companies are advancing to include real-time analysis of transactions to look for fraud and provide valuable insights to retailers. For businesses of any size, using machine learning to evaluate the massive quantities of data from transactions helps to optimize operations and work proactively against fraud.
In the era of speed and convenience, innovations in payment processing are foundational to the customer experience. The adoption of an integrated payment platform, such as Stax, provides a secure and scalable way to serve customers. Helpful analytics and 24/7 support mean your business can rest assured that you and your customers receive best-in-class service.
Just as there are many options available to customers for their shopping needs, there are options in choosing your payment processor. Stax operates without hidden fees, contracts, or markups. Our integrated payment system has solutions for every business and works with existing software applications seamlessly – saving your business time and money.
From small businesses to large enterprises, choosing the right provider for your payment processing needs is critical, as is the need to prioritize the customer experience.
With Stax, your business and your customers experience innovative and scalable payment solutions with award-winning service. Get in touch with us to learn more.
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