The trajectory of the fintech and payments revolution that was building before March 2020, and that we saw accelerate throughout the pandemic, is very much here to stay. For example, payments made via mobile devices alone are expected to exceed USD 2 trillion globally by 2023.
Evidence suggests, however, that this has not been merely driven by a wider cultural preference for convenience and efficiency, but that success is linked to a deeper ideological shift that sees consumers seeking economic empowerment through banking services that offer high standards of flexibility and transparency.
The pandemic years saw investment in fintech reach record highs, as conditions made the need for innovation clear. When investment levels dropped in 2022, there was a creeping fear not only that the boom was over, but that some kind of ‘fintech winter’ had set in.
What we have been witnessing is a period of substantial market consolidation, with some players exiting the market and several notable acquisitions also making their mark. Crucially, numerous established banks and financial services players have increased their in-house innovation to create their own digital offerings. While investors may be tempted to bet on these incumbents in times of geopolitical uncertainty, it’s smaller firms and start-ups that set the gold standard in the pace of innovation.
The upshot is that the sector is growing, both as the technology improves and as adoption increases. Furthermore, 86% of industry experts believe that traditional payments providers will collaborate with fintechs and technology providers as one of their main sources of innovation. This highlights an important reality -the reduction in direct investment levels doesn’t correlate directly with the perception that confidence in the fintech sector is wavering, as some commentators would have us believe.
Within payments, the Buy Now, Pay Later (BNPL) sector showcases the way ahead for digital payments. Both consumers and retailers are increasingly integrating BNPL services into their lives and businesses respectively, and interest in the payment method has only increased over the course of the cost-of-living crisis.
On the other hand, retailers are waking up to the fact that offering more flexible payment options is crucial to attract new customers, at a time when increasing revenue is mission-critical. In 2021 alone, Clearpay generated GBP 739 million in incremental sales for UK merchants, with the number set to increase as deferred payment services become a must-have rather than a bonus.
Moreover, consumers want consistency in their shopping experiences, whether they’re shopping online or in-store, which determined Clearpay to provide its services to merchant partners for in-store payments as well.
The Festive Forecast data showed that nearly one in five Gen Z and Millennial shoppers would be prompted to buy gifts they hadn’t considered before if they noticed that the merchant offered a BNPL service, confirming that the future of digital payments will be shaped by the ability to provide flexibility to an increasingly savvy generation of consumers.
This generational point is key, as BNPL’s trajectory speaks to another important shift that will determine the future of digital payments - the turn away from credit and toward debit. Today’s Millennials and Gen Z shoppers saw their parents struggle with debt in the wake of the 2008 financial crash and are wary of falling into the same trap.
In other words, the digital payments revolution is tied to broader conversations about the future of personal finance. Today’s consumers and businesses are consistently demanding services and payment options that provide them with more financial freedom, and a world where trade and commerce aren’t restricted by expensive credit and excessive fees.
Rich Bayer is Executive Vice President, UK and EU Country Manager, and Head of Sales at Clearpay, where he leads more than 100 employees. Before relocating to London in March 2021 to take up his current role, Rich was based in San Francisco, where he was EVP of Client Success at Afterpay for two years. In that role he built the Client Success team from the ground up and oversaw retail relationships.
Afterpay, known as Clearpay in the UK and Europe, is transforming the way we pay by allowing anyone to buy products immediately and pay over time - enabling simple, transparent, and responsible spending. Afterpay is currently available in Australia, Canada, New Zealand, the United States and the United Kingdom, France, Italy, and Spain. It is a wholly owned subsidiary of Block, Inc. (NYSE: SQ).
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