In 2022, the penetration of digital payments reached 89 percent. Simas Simanauskas, Partnerships Director at ConnectPay, has shared what will continue fueling the payments market further, and which areas experts should keep a close eye on in 2023.

Creating more dynamic shopping experiences

Automation continues to increase in many industries, including e-commerce. While some predict a gloomy future, where this trend could potentially result in losing 34 percent of current job roles, retailers are not as pessimistic. Some see it as a way to build on top of the existing shopping process and refine it to seamlessly guide the consumer.

One such example — a US-based e-commerce store Bonobos, which connected its online customers with in-store personnel, who could support their ad hoc inquiries. This hybrid approach to managing customer service still has a few hiccups to resolve, such as increased workload for staff. However, it attests to the mindset of seeing automation as an opportunity, not a threat, to make the entire shopping experience more dynamic.

“Businesses must leverage the efficiency gained from automated processes to refine their operations. When it comes to checkout, we are already at a place, where if the process is not self-explanatory — you may have already lost the consumer,” says Simanauskas. “However, if done right, it is a chance to create high-touch roles for better user experience, refine services and gain an edge in the ever-competitive checkout payments market.”

A2A payments rising upward 

Earlier, experts predicted that account-to-account (A2A) payments will account for 20 percent of all global payments by 2023. While the exact number is hard to pinpoint, A2A payments have been growing exponentially, with companies raising millions to continue refining the solution. This boom can largely be accredited to the introduction of Open Banking; third parties gaining access to financial institutions’ data enabled more competition to enter the market. 

According to Simanauskas, A2A will continue attracting interest from both merchants and fintechs alike, even more so with the European Central Bank’s (ECB) push for wider adoption of instant payments, or the Federal Reserve’s plans to launch a faster payments system in the United States.

"A2A makes checkout more straightforward by eliminating time-consuming signup procedures and omitting the requirement to enter long strings of complex information. On top of that, direct payments from a consumer's bank account to a merchant's keeps the costs for sellers to a minimum,” Simanauskas explains. “The need for faster transactions is apparent both in Europe and across the Atlantic, as it’d bring greater operational efficiency and buying power for business.”

Optimizing for one-click mobile payments

For the past five years, mobile commerce has been growing upward: in 2016, it accounted for 52.4 percent, in 2021 — a whopping 72.9 percent of the total retail eCommerce market. Furthermore, experts predict that 60 percent of the world's population will be using digital wallets by 2026. However, to monetize on this trend, businesses have to take time to optimize for mobile purchases, as the latter currently leads in cart abandonment, with a rate of 86 percent.

“Businesses are not yet taking the full advantage of mCommerce, meaning, their payment flow is often not optimized to accommodate the simplicity and flexibility that mobile payments demand,” Simanauskas says.

He noted Apple Pay as an example. Currently, it is one of the world's most popular one-click payment solutions, with its user base predicted to reach 48.7 million in 2023, accounting for 17.3% of the population. “Having such a significant market share, any merchant which fails to offer Apple Pay as a checkout method will undoubtedly lose a potential stream of revenue. The same goes for failing to include other digital wallets as payment methods.”

Refining checkout experience

Cart abandonment is a recurring problem in e-commerce. In 2022, the typical percentage of shopping cart abandonments was slightly under 70%. All this comes from unclear pricing, multiple log-ins, and confusing user experiences. Improving the checkout experience would help e-businesses recoup lost sales of up to 18 billion USD globally. If left unresolved, it's feasible this figure may reach 4 trillion USD.

“Cart abandonment remains a problem for many retailers. One way to address this — keeping customers engaged from start to finish, from the second they add their first item to the cart. Also, reducing any possible friction,” he noted, outlining Hollister as an example. Recently, it rolled out the option to pass on one’s shopping cart to third parties.

“We live in a fast-paced world, therefore timely nudges can act as a reminder for consumers as well lead them to the desired outcome.”

Embedded finance

Embedded finance, often referred to as Banking-as-a-service (BaaS), allows embedding financial services into any company. A report has stated that 88% of businesses that use embedded finance noticed an increase in engagement, while 85% said it has boosted customer acquisition. Consequently, it is expected the demand for the service will only continue growing.

“Embedded finance enables non-finance companies to hit the ground running, therefore its appeal has not diminished in the slightest. Furthermore, I think we can expect to see interest in BaaS growing in other spaces, such as retail. As an example, ‘buy now — pay later’ is a particularly expanding segment of embedded finance that should be closely watched in 2023,” said Simas Simanauskas.

About ConnectPay
ConnectPay is an all-in-one finance platform for online businesses, offering a wide range of payment solutions, including SEPA and SWIFT payments, IBAN multi-currency accounts, Banking-as-a-Service, Corporate cards, and merchant accounts. All processes are operated via a fully automated fraud prevention and compliance management ecosystem. A smooth onboarding process and customized client solutions enable businesses to utilize innovative payment solutions to meet the needs of their digital customers. ConnectPay holds an EMI license, issued by the bank of Lithuania, and is a member of the monetary authority of the Eurozone.