Over the past two years, the payments market has faced more than one unprecedented challenge, starting with the pandemic, and ending with economic and political events, e.g., Brexit or the recent sanctions, aimed at Russia. Despite the unrest, market players continue to innovate, giving rise to new trends which push the industry forward. Marius Galdikas, CEO at ConnectPay, has commented on what elements are currently shaping the payments market.
Booming A2A payments
Account-to-account (A2A) payments have become popular amongst merchants due to their inherent advantages regarding transaction speed and costs, to name a few. A2A payments are made directly between accounts — this helps to shave off processing fees, which accompany card transactions. As there are no intermediaries, merchants gain access to funds faster, reducing friction in online payments. With startups closing millions-worth of seed rounds, it’s highly likely more businesses will consider opting to incorporate A2A payments into their checkout experience.
“Card payments remain the dominating choice in the market, however, considering the pace at which interest in A2A is growing, this may push card schemes to a shaky position,” Galdikas commented. “That said, A2A payment providers still have a few challenges to address, if they want to get on the same level as prevalent payment methods, one of them – conveying value to shoppers, as merchants — not their customers — remain the primary beneficiaries.”
Going green
United Nations has set an ambitious goal for the world – to reach net-zero emissions by 2050. Fintechs are stepping up to the plate, reevaluating their own impact on the environment, funding green innovation, even rolling out solutions designed to help other companies lighten their carbon footprint. As the world continues moving towards net-zero economy, the focus on carbon offsetting among fintech will only increase, most likely spurring more ‘green’ innovations as well.
“As digital trendsetters, fintechs could help facilitate transition to becoming carbon neutral for others as well,” Galdikas noted, also emphasizing ‘climate fintech’ success in 2021. According to CommerzVentures’ report, last year funding for such fintechs were 3x higher than in all of the previous years.
Embedded finance
Embedded finance enables non-banks to offer financial services, which opened many new opportunities for businesses. A good example of this could be the Amazon marketplace, which itself cannot issue loans. However, having partnered with a ‘buy now, pay later’ provider Affirm, its clients can now get loans for their purchases.
Barclay reports that, in payments alone, embedded revenues in 2020 were $16.1 billion. In the next 10 years, the industry is predicted to be worth approximately $7 trillion.
“The demand for embedded finance products is not surprising, as it enables more companies to enter the fintech space as well as present their customers more tailored services, based on their spending behavior,” Galdikas commented.
No-code solutions
No-code or low-code describes an approach to software development where little to no coding skills are required, meaning, specialists without a coding background can easily edit or launch new products. According to Galdikas, this is a powerful tool for fintechs, leading to agile innovation.
“There are differences in how each company operates, so an off-the-shelf solution may not always support its workflow and processes,” Galdikas noted. “No-code or low-code solutions enable to not only build fintech software tailored specifically to the company but also involve diverse experts, such as designers or engineers, and create an overall better product.”
Exploring metaverse
Metaverse is still in a nascent stage, however, fintechs are already exploring what opportunities lie in this virtual world. Setting up a robust financial services framework will be key to enabling users to fully participate in the digital ecosystem.
“Fintechs are likely to be one the key players shaping Metaverse’s payments landscape, owning to their digital-first nature,” the expert shared. “Even though the concept of Metaverse does not match the reality yet, it has the potential to completely transform how online retailers interact with their customers, and fintech will be an important middleman to ensure it all goes smoothly.”
