Welcome to our latest Industry Trends Update, in which we bring you selected predictions for the coming year (and beyond) from leading payment industry analysts.
Read on to find out about:
- Top trends in commercial banking and payments, according to Datos Insights
- Javelin's expectations for Tap to Phone and payment orchestration
- IDC's predictions around unified POS payment solutions, embedded payments, and use of AI to optimize payment routing
1. Datos Insights: payment modernization, ERP banking, and hot competition in small-business banking
In its 'Top 10 Trends in Commercial Banking and Payments, 2024'1 report, Datos Insights discusses how modernization is driving opportunities across the industry on a global scale. We picked out three trends to focus on for 2024 and beyond.
Payment modernization fills critical needs for automation and real-time payments
Regardless of where a bank is on its modernization journey, Datos Insights sees the integration of automation tools and real-time payments (RTP) capability as critical to meeting business customers' demands. Reporting settlement speed as their biggest payment gap, many businesses are turning to fintech providers for connection to RTPs.
To help boost their market opportunity, Datos Insights indicates that banks need to move towards a modernized infrastructure that connects them to real-time rails, and allows capabilities such as receivables and payables automation with intelligent payment routing based on series of preferences like speed or cost.
Visa Acceptance Solutions connects with various RTP networks—ask us about the solutions we can provide.
APIs and open banking are evolving into ERP banking
Open banking allows the linking of corporate software platforms—like enterprise resource planning (ERP) systems—to core bank systems using APIs, enabling more effective and secure access to and management of financial data and transactions. As with faster payments (discussed above), banks need to attract and retain enterprise customers who have more choice than ever, by providing services that are faster, more integrated, and easier to use.
One option for banks, suggests Datos Insights, is to use APIs to offer services through the software systems enterprises already use. Doing so transitions enterprise customers from online banking to embedded banking—enabling them to seamlessly access banking services directly from platforms like ERP without switching to online banking.
Find out more about how Visa is working to unlock the power of open banking and enable the creation of new experiences across the globe.
Small-business banking competition is heating up
Financial institutions have tended to target consumers and corporate customers with their transformation and modernization efforts. Now, says Datos Insights, the push to serve small-to-midsize business (SMB) customers is on and will continue to rise in 2024 and beyond.
To date, incumbent banks have been successful in the SMB market owing to their physical presence and online and digital capabilities, and, in the case of smaller banks and credit unions, their more personalized service.
Yet, 65% of SMBs report they currently go outside their bank to meet at least one financial need; and a growing cohort of SMBs see modern, digitally forward banking capabilities and value-added services as essential. Many banks are therefore looking to enhance their SMB proposition with enhanced online banking, cash management tools, vertical sector focus, improved payment capabilities, and the kind of embedded banking services described above, to compete more effectively in the SMB market.
2. Javelin: Tap to Phone and payments orchestration
In its '2024 Trends & Predictions: Merchant Payments,'2 Javelin Advisory Services comments on topics including increased adoption of Tap to Phone and solidification of the industry's definition of payments orchestration.
Tap to Phone
Javelin believes that increased adoption of Tap to Phone, which some call SoftPOS, technology by acquirers and merchant service providers will make it popular with merchants, who will see it as a way to help streamline the in-store experience. Tap to Phone allows merchants to accept contactless payments on a standard smartphone, with no need to invest in a terminal. So, it will be easier for merchants to switch payment providers, who will need to rethink how they keep their merchant customers loyal.
Javelin indicates that Tap to Phone is set to change how payments are made in store, pushing shoppers towards contactless cards and mobile wallets. By untethering checkout from a fixed location, the technology allows shoppers to pay anywhere in the store and gives merchants new flexibility when designing checkout experiences. Javelin expects that SMBs’ enthusiasm for Tap to Phone technology will be the key driver of growth and expansion across the U.S. and abroad.
Tap to Phone is just one of the next-gen in-person payment options we offer through Cybersource.
Tap to Phone technology should win over merchants of all sizes
- Sales can be finalized anywhere
- Lowers costs
- Removes a barrier to switching providers
Tap to Phone technology
- Sales can be finalized anywhere
- Can be blended with other POS options in a large store
- Enables associates to provide a high-touch experience
Figure 1. Tap to Phone technology’s key values for SMBs and enterprise merchants
Javelin predicts that the payments industry will develop a consensus definition for the term 'payment orchestration' this year. It considers this a critical step as the payments landscape becomes increasingly complex owing to factors such as the growing popularity of alternative payments and merchants' interest in selling online internationally. Javelin anticipates that merchants will need to use a payment service orchestration layer to handle all this complexity and keep payments running smoothly, regardless of where transactions originate and the processors, acquirers, gateways, networks, and other stakeholders that may be involved.
As well as agreeing on a definition for the term, Javelin suggests that payment service orchestration solution providers will also need to put more effort into their messaging to attract merchants to their solutions. AI is a critical enabler of such orchestration solutions—read our blog on the rise of AI in payment acceptance.
3. IDC: predictions beyond 2024
The 'IDC FutureScape: Worldwide Payment Strategies 2024 Predictions'3 looks beyond 2024 with 10 predictions for 2025 and beyond. We've picked out the following three:
By 2025, 30% of SMB/midsize retailers will adopt unified POS payment solutions to boost competitiveness with better checkout experience and eased ability to add new contactless payment types
IDC indicates that many retailers and restaurants plan to invest in technologies to improve the checkout experience for customers. Payment/POS vendors are moving to offer unified payment and POS solutions that can support the ongoing drive towards better experiences. Benefits include:
- The ability to add new payment types more easily
- A more efficient checkout with shorter transaction times
- Access to data insights on customer behaviors and preferences unavailable with siloed data, which can help drive customer loyalty and enhance merchant competitiveness
By 2028, embedded payments in ecommerce environments will represent over 70% of all online transactions, enhancing user experience and streamlining purchase processes
IDC says that embedded payments are blurring the boundary between shopping and payment in ecommerce. Previously, product selection and payment typically took place on separate platforms, leading to a jarring shift that could result in abandoned carts. In contrast, embedded payments allow for a more fluid shopping journey, and are becoming more prevalent as increased availability of APIs simplifies integration of payment gateways into ecommerce platforms. Customers enjoy a continuous checkout process that can improve conversion rates, enable capture of impulse purchases, and increase satisfaction and loyalty.
Visa Acceptance Solutions can enable embedding of payments into ecommerce solutions via a single integration with the Visa Acceptance Platform, which offers banking-grade reliability and connects you to a marketplace of payment and technology leaders. Through our modular payment capabilities, we can work to embed nearly any part of the payment journey in a non-finance-based platform.
By 2026, 10% of banks will use AI to optimize payment routing
In the structured world of payments, machine learning (ML) and artificial intelligence (AI) processes have found strong use cases, especially in fraud prevention. A case in point is our Decision Manager platform, which uses ML and AI to detect fraud in seconds.
IDC expects that, as digital payments become more complex—with more payment types and options, and more data inherent in every transaction—the case for adopting ML to optimize payments will become stronger for banks and payment processors.
In many cases, modernization of digital payments involves adoption of ISO 20022 message formats (mentioned above) that carry much more data. IDC sees an opportunity to leverage that increased data by using AI to analyze payments more carefully and create more flexible and precise decision models, which can result in better decision-making and improved authorization rates.
We'd love to talk
We'd love to talk with you about these and other trends and innovations in the payments industry. Feel free to reach out and discover how Visa Acceptance Solutions and our uniquely open payments platform can help you build the future of payments.
And look out for our next Update for more news and commentary.4
1 Datos Insights: Top 10 Trends in Commercial Banking & Payments, 2024: Modernization Creates New Opportunities Across the Industry; January 2024; Erika Baumann
2 Javelin Advisory Services: 2024 Trends & Predictions: Merchant Payments; November 2023, Daniel Keyes
3 IDC FutureScape: Worldwide Payment Strategies 2024 Predictions; November 2023; Aaron Press et al.
4 Studies, survey results, research, recommendations, and opportunity assessments are provided for informational purposes only and should not be relied upon for marketing, legal, regulatory, or other advice. Recommendations and opportunities should be independently evaluated considering your specific business needs and any applicable laws and regulations. Visa Acceptance Solutions is not responsible for your use of any studies, survey results, research, recommendations, opportunity assessments, or other information, including errors of any kind, or any assumptions or conclusions you might draw from their use. Except where statistically significant differences are specifically noted, survey results should be considered directional only. Neither Visa Acceptance Solutions, nor any of its employees, subsidiaries, parents, or affiliates make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information disclosed herein.