In the run-up to the close of a year that’s cultivated promising new heights for the payments industry, many of the sector’s leaders and pioneers are questioning what’s going to be coming their way once 2022 is at our doors.
Here to answer those thoughts and queries is the embedded fintech company Nium. In this exclusive for The Fintech Times, the company has gathered its experts and best industry thinkers to put forward their predictions for what’s coming to the world of payments next year.
Nium provides banks, payment providers, and businesses of any size with access to global payment and card issuance services via one API. Its modular platform enables pay-outs, pay-ins, card issuance, and banking-as-a-service.
Once connected to the Nium platform, businesses can pay out in more than 100 currencies to over 190 countries – 85 of which in real time. Funds can be received in 33 markets, including Southeast Asia, the UK, Hong Kong, Singapore, Australia, India, and the US.
Nium’s growing card issuance business is already available in 32 countries, including Europe (SEPA), the UK, Australia, and Singapore. Core to Nium is its licence infrastructure, built over time in some of the fastest-growing economies. Nium owns the broadest licence portfolio, covering 11 of the world’s jurisdictions, enabling seamless global payments and rapid integration, across multiple geographies.
What can we anticipate? What should we judge with caution? And what are the developing trends that industry developers won’t want to miss? Nium has the answers:
The payments industry is bouncing back after the pandemic, ushering in a new era of urgently needed innovation. We asked our experts to predict the most significant milestones in the year ahead and the below points summarise their thoughts.
Regulators will hammer down hard on payments companies
1. The crypto crackdown will unlock industry-wide product innovation
Crypto is coming under more scrutiny. Turkey outlawed paying for items with cryptocurrency, while China declared all crypto transactions illegal. The sector is bracing for more, with many crypto companies ramping up compliance hiring.
As regulation bites, returns will be compressed. That might lead to new product innovation in the crypto space. DeFi funds, for instance, are likely to grow for some time, but will eventually slow as they’re mixed with traditional yield products. That could mean we start to see some new exchange-traded funds emerge to support them. Also, with the rise of NFTs comes new identity verification models to prove their ownership. This could have enormous implications for the entire financial services ecosystem.
2. Crypto acquisition of fintechs will put them ahead of the competition
Many crypto players are identifying gaps in their stack that they need licensed fintech to address. This will spur a surge of acquisitions.
Banking licenses could solve a lot of problems for crypto companies, by making crypto firms appear more credible and allowing them to offer a more diverse and competitive product portfolio. Those without licenses might also find themselves on the back foot. For example, Hong Kong has proposed that only licensed crypto companies be allowed to operate. Acquisition will let cryptos keep their foreign exchange (FX) costs low, add new revenue streams and stay closely involved with core processes and give them full visibility and control over the user experience.
3. BNPLs will be forced to become credit brokers
Buy Now, Pay Later loans are only possible because the industry exists in a grey area between payment licenses and lending licenses. But regulators are concerned that BNPL firms aren’t required to conduct rigorous creditworthiness assessments, making BNPL attractive to consumers who don’t qualify for credit cards. Information on BNPL defaults is also not effectively shared back with credit rating agencies, which can cause future lenders to overestimate a borrowers’s creditworthiness.
Regulators will likely force BNPLs to become credit brokers in order to protect consumers, which could mean smaller retailers opt-out of offering BNPL entirely.
The travel industry will accelerate payments innovation
1. The ‘roaring 20s’ of travel will drive payments innovation at pace
In 2022, travel firms will infuse new-age payment capabilities and replace legacy systems with digital solutions.
Options like BNPL are already on the rise, with some also considering direct bank transfers and digital wallets. 22% of travel executives see the implementation of new payment models as a top priority in the year ahead. Enterprise resource management (ERP) and treasury management systems (TMS) transformation is also imminent across the industry.
2. Travel providers will look for a place in the payments space – and some will struggle
Some big players are already making inroads. Booking.com now has a fully-fledged fintech unit, which has developed proprietary local-wallet payment options and is exploring FX and BNPL. But only large travel firms have enough resources to understand the nuance of individual markets and to tailor their products accordingly.
Others might find the move into fintech harder. Travel is a global industry, which generates a huge amount of compliance complexity, and there are challenges with customer-facing products. So the majority of companies will eventually look to partner up.
Global payments will be transformed by new infrastructure and acquisitions
1. North America will finally catch up with real-time payments
Thanks to a myriad of regulatory and technology issues, North America has lagged behind other jurisdictions in doing this, but now the region is playing catch-up. The FedNow programme is currently in pilot with over 200 financial institutions in the US and due for launch in 2023, while Canada’s Real-Time Rail (RTR) is expected to launch in 2022.
As American banks offer real-time payments, it will open up commerce, competition and ultimately better customer experiences.
2. Hundreds of small fintechs will be swallowed up by bigger players
The fintech landscape is oversaturated. Smaller players unable to offer genuine innovation or unique access to data are struggling to win the attention of either customers or investors. Many will opt to merge into market leaders. In particular, B2B payment companies will look to acquire smaller B2C fintechs to mine their tech and talent.
This spate of acquisitions will accelerate the trend towards greater ecosystem collaboration and ‘rebundling’ of the fintech stack. That’s good news for consumers, who’ll benefit from an increased pace of innovation.
As the global payments infrastructure continues to evolve, change will be the only constant in the next twelve months and beyond.