EMPOWERING NEW BUSINESS INNOVATION WITH PAYMENTS
How businesses are using payments to enhance customer experiences and open new markets
ebook, research insights by IDC
Executive summary
2023 marks the arrival of the connected payments era, characterized by the emergence of innovative payment types, cuttingedge payment infrastructure, and novel business models stemming from the interconnected payment ecosystem.
The research in this InfoBrief provides insights from in-depth interviews with 10 industry leaders representing large global companies and fast-growing tech players worldwide. These interviews delve into perspectives on the era of connected payments and how organizations navigate challenges within the rapidly evolving payments landscape.
Forward-thinking organizations in 2023 have recognized the strategic significance of payments, elevating it to a key pillar in their overall business strategy and long-term plans. Payment is no longer viewed solely as a transactional function but as a critical revenue accelerator and a cost-reduction opportunity. Failing to acknowledge the substantial impact
of payments may cause businesses to lag behind industry leaders who have embraced payments as a strategic priority.
Large and fast-growing organizations require scalability and flexibility in their payment stacks. This is often achieved by utilizing multiple payment providers, allowing businesses to access bestin-class solutions in different regions and segments in which they operate. These organizations can then focus on orchestrating their payment stacks to deliver maximum value.
The rapid emergence of new payment methods presents significant opportunities for businesses to capitalize on. The interviews conducted by IDC reveal that activating new payment channels such as BNPL (buy now pay later) can yield a monthly revenue increase of up to 32%.
The complexity of new payment types across regions and the multitude of players in the ecosystem highlight the importance of a holistic vision of payment flows and orchestration of the payment stacks for success. Innovative businesses recognize
payments as a crucial element of the overall customer experience rather than an isolated function. They continually seek ways to optimize payment experiences to enhance revenue generation and mitigate losses from fees and fraud. These companies require strategic partnerships and scalable solutions that adapt to their evolving needs and continually optimize payment flows to achieve their goals.
Despite advancements in payment technologies, significant opportunities for revenue generation and cost savings within the payments space still exist. Companies with a progressive mindset can capitalize on these opportunities by leveraging technology to achieve their goals. By staying ahead of the curve and embracing innovative payment technologies, businesses can unlock new revenue streams and achieve operational efficiency, ultimately driving overall business success in the dynamic payments landscape.
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Innovative payments models driving transformation
The payments ecosystem has evolved rapidly in the past few years, leading to new payment types and infrastructure advancements. However, the requirements for payment technology have also shifted. To thrive in the connected payments era, businesses need flexible payment capabilities that enable growth and empower them to seize new opportunities.
Timeframe Designedfor Mission
Integrativecapability
Orchestrationcapability
Deploymentmethod
Native scalability
The development of payment technology
Card era
1970s to 2000s
Credit and debit cards
Built to process physical cards domestically and internationally
Limited integrative capability:
Separate channels and rails used for different payments
Limited Performed manually
Local servers
The first generation of payment technology focused on processing physical credit card transactions and prioritized the establishment of robust connections between physical locations.
But this generation’s hardware-centric approach limited integrative capabilities, orchestration, and scalability.
Internet era
2000s to 2020
Mobile wallets, online payments
Built to process online payments globally
Single platform integrative capability for various global payments
Generally performed with additional applications and some manual workload
Local servers, private cloud
Flexible scalability
The surge in ecommerce drove the advent of the internet era in payments. This led to the growing range of payment types, such as mobile wallets, and offered the capability to integrate multiple payment options onto a unified platform swiftly.
Moreover, it facilitated seamless integration with existing systems, ensuring a streamlined and comprehensive payment experience.
Connected payments era
2020 and beyond
Real-time payments, BNPL, embedded payments, CBDCs, cryptocurrency
Built to drive payment connectivity across global platforms
Fluid integration at platform level, channel and brand agnostic
Automated and integrated orchestration capabilities
Private and public cloud
Dynamic scalability
The most recent payment innovations cater to digitally native payments on new infrastructure, including real-time payments, BNPL, and embedded finance. This era emphasizes the need for flexible and scalable platforms that enable payments-asa-service capabilities to extend outward.
These platforms seamlessly integrate payment channels and other payment platforms, allowing for smooth orchestration through a single connection.
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Navigating payment innovation: Regional perspective and global trends
Diversity characterizes the payments landscape in various regions and markets. This diversity is seen in regulatory environments, consumer preferences, and payment trends. Businesses must understand these factors to thrive and meet customers’ expectations for exceptional digital services. While each region presents unique dynamics, global payment trends influence local markets. These trends directly impact the rapid adoption of new digital payment methods, such as BNPL, wallets, and real-time payments. Collectively, these trends signal a global shift in the payments landscape.
Americas Europe Asia/Pacific
l Growth of card-like/closed-loop payments: Businesses are looking to optimize the cost of payments, leading to the emergence of multiple new ownbrand payment platforms.
l Modernization of issuing and processing platforms: Cloud-based payment platforms offer multiple new features, such as PaaS modules.
l Issuer-led BNPL: Visa, Mastercard, and Amex offer merchants and banks their BNPL stack and solutions.
l FedNow real-time payments and Automated Clearing House (ACH) changes: In July 2023, FedNow will bring real-time payments to banks across the USA.
l Real-time payments growth: In Latin America, countries such as Brazil have experienced surging transaction volumes due to the mass adoption of Pix, the local real-time payment method.
l Instant cross-border payments in EU: The single euro payments area (SEPA) scheme brings real-time cross-border payments to the European Economic Area (EEA).
l New payment architecture in the UK: The UK’s New Payments Architecture (NPA) adds further layers to real-time payments, enabling new functionalities such as Request to Pay and B2B payments, which further advance the use cases of real-time payments.
l Open banking revolution: Open banking continues to grow in its use cases and participants, with innovations emerging from the existing architecture.
l Central bank digital currency (CBDC), the digital euro: The EU and Nordic countries plan to launch CBDCs soon after completing trials.
l Australia’s New Payments Platform: Australia’s New Payments Platform (NPP) has brought real-time payments to all banks and will continue developing new applications and use cases for B2C and B2B segments.
l Real-time payments surge: Countries like Thailand and India have witnessed significant real-time payments volume, contributing to the growth of innovations and transforming the payments landscape in Asia.
l BNPL growth: In certain regions with low credit card penetration rates, BNPL has emerged as an ideal solution for digital payments and has experienced rapid growth in the Asia region.
l CBDC launches: With China being the first to launch a retail CBDC globally, other markets such as India and Indonesia are also looking to follow with their own digital currencies.
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Global perspectives: Adapting to a changing payments landscape
10 key global decision makers from eight markets offer a unique international perspective.
IDC conducted interviews with 10 senior payments leaders worldwide to:
l Gain insights into recent payments landscape changes
l Explore the importance of payments to their businesses
l Establish the strategic approach of their organizations to adapt to these changes
IDC looked into their digital transformation plans and explored opportunities to optimize payments across their business operations. The interviewees included business leaders from a mix of global giants and fastgrowing technology firms, providing a comprehensive perspective on how established market leaders and emerging players leverage payments to enhance their competitiveness in the new age of digital commerce.
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Mexico — A leading global hypermarket and grocery retailer
Brazil — A leading global fast food chain in Brazil
India — Market-leading ride-hailing company
Israel — Gett, the country ’s leading ridehailing company
Germany — A leading global sports apparel manufacturer and retailer
Singapore — ZeusX, a pioneer in global game item marketplaces
Singapore — A leading retail stock trading platform
Singapore — Regional healthcare giant
New Zealand — One of the top global telecommunications (telco) companies
Italy — A leading ecommerce retailer
Harnessing the power of payments for business growth
How payments impact revenue and costs when entering new markets?
The pandemic has accelerated digitalization and has significantly boosted online and contactless payments.
This has become a catalyst for change in consumers’ shopping habits. The interviews with payment leaders revealed that customer migration from POS to online shopping has prompted companies to optimize their online sales strategies to align with customer preferences.
How improving payments uplift the overall customer experience?
The interviews revealed significant insights into the importance of payments to companies.
Many organizations now consider payment optimization essential for a positive customer experience. By optimizing payments, companies can keep customers engaged, enable seamless purchases and increase revenue. This shift emphasizes the continuous efforts that companies can undertake to further enhance the payment experience.
How has the post-pandemic retail landscape been altered?
According to the interviewees, the economic situation 2023 is expected to introduce additional competition, cost, and revenue pressures.
Payments play a crucial role in these areas, as they have a direct impact. By implementing payment orchestration, businesses can increase revenue and reduce costs while delivering consumers’ preferred payment methods. Additionally, payments can be critical in accessing new markets and generating new revenue streams. Offering tailored payment choices that cater to local needs can serve as a unique differentiator among competing brands.
Realizing payments potential: Impacting revenue generation and growth strategies
Payments play a pivotal role as a key pillar of business strategy
“The importance of payments has increased at a very fast pace. It is a pillar of our long-term strategy plan now.” — A leading global fast food chain in Brazil
“Payments are a foundation for us, they’re a key capability that businesses need to have, and you need to be excellent in it.” — A leading global sports apparel manufacturer and retailer in Germany
“From day one, payments have been a strategic factor; if we remove a popular payment method, we can even see a 30% drop in a month.” — Alex Tay, ZeusX, a pioneer in global game item marketplaces in Singapore
Payments have a huge impact on revenue and can influence the shaping of strategies for online businesses. Hence, payments should not be regarded as a commodity but as a vital client-facing asset that necessitates continuous optimization for impactful results.
Excellence in payments has become the new benchmark for businesses
”Payments are not transactions; they are an experience and an enabler, customers have the choice now, and we have to cater to that.” — One of the top global telco companies in New Zealand
“It’s an absolute must-have [to possess] technical excellence to meet customer expectations [in payments].” — A leading global sports apparel manufacturer and retailer in Germany
By treating payments as an afterthought based solely on pricing will put merchants at a significant disadvantage compared to industry leaders who set high benchmarks for their customers’ payment experience.
Merchants are increasingly focused on delivering exceptional performance in every aspect of payments, from processing times to offering a wide range of payment methods. This high standard of excellence in payments is an integral part of the overall customer experience and serves as a benchmark that all merchants should strive to achieve.
Payments can grow new markets and revenues while reducing costs
“Introducing BNPL increased sales by 32% during the holiday period.” — One of the top global telco companies in New Zealand
“It’s important due to the revenue we can gain by using preferred payments, and they can also reduce costs and play an important role in customer centricity and data.” — A leading global fast food chain in Brazil
The payment options offered can make a significant difference between success and failure. This is particularly evident in markets with low card usage, where local payment methods such as digital wallets are crucial for business.
Introducing new payment methods also directly and significantly impacts revenue. The plethora of options and choices available to businesses means that with the right tools, insights, and technology, payments can become a true catalyst for growth.
Scaling success: Why large organizations require robust payments infrastructures
The multivendor stack model is standard for large international operations
“Leadership has decided that as many payment methods as possible are the goal, bringing whatever the customer wants to use, and we want to drive the customer to use the best possible payments.” — A leading global fast food chain in Brazil
As businesses expand their online operations to cater to new customers, increase their product ranges, and enter new markets, payment demands also increase proportionately. Merchants may invest more in their payment stacks and add new payment partners to cater to new channels and overseas markets to optimize costs and customer experience.
Among the 10 companies interviewed by IDC, six had more than five payment providers in their stack , with three having more than 10 payment providers . This decision to use multiple partners often stems from supporting various payment methods optimally.
The key to payment optimization lies in having a resilient, scalable, and economical payment stack
“We have chosen a multi-acquirer strategy to better satisfy [requirements], improve success rates and costs of transactions.” — Alexander Zhelonkin, Gett, a leading ride-hailing company in Israel
The significance of scalability and resiliency in payments was emphasized during interviews, especially for merchants whose products experience sudden spikes in demand, such as limited-edition apparel. It was noted that these surges could overwhelm payment processors, resulting in online failures and substantial revenue losses for merchants due to unfulfilled orders.
Hence, finding ways to automate and streamline manual payment work will greatly benefit companies facing similar challenges.
Continuous evolution and rescaling of payment stacks are essential in response to changing market needs
“Payments excellence is the overall goal, improving the experience and fraud detection.” — One of the top global telco companies in New Zealand
“We are using AI and IoT in the payments’ analytics operations; with this in place, we can segment customers by age/group and improve our selling approach. AI is used to modify and develop costings for each payment, allowing us to develop a strategy.” — One of the top global telco companies in New Zealand
Optimization and upgrades also bring opportunities to implement new technologies into workflows. Technologies such as AI and IoT can further drive improvements.
Given the growing workforce and the increasing complexity of payments operations, merchants will need to explore ways to optimize their own technology stacks further. This optimization is critical for improving internal costs and enhancing the customer experience, ensuring competitiveness in their respective industries.
Unleashing new opportunities: How changes in payment trends are empowering merchants
BNPL and digital payments are rising fast Opening up new payment channels leads to significant revenue increases
”BNPL accounts for 30% of total sales.” — A leading ecommerce retailer in Italy
“Credit cards as a percentage of total sales have decreased,” — Alex Tay of ZeusX, a pioneer in global game item marketplaces in Singapore
Many new companies with various business models for installment and deferred payment options have emerged, contributing to the rapid global growth of BNPL.
In addition to BNPL, other payment methods experiencing significant growth include mobile wallets like Pix in Brazil and localized wallets used in Southeast Asian markets such as Indonesia and Thailand. Direct real-time bank payment systems like India’s Unified Payments Interface (UPI) have also experienced rapid growth. This highlights the evolving landscape of payments as newer methods gain prominence.
These trends indicate the dynamic nature of the payments industry. Merchants need to stay updated with consumers’ changing preferences and behaviors and adapt their payment stacks accordingly to remain competitive in the dynamic payments landscape.
“We expect 6% to 8% increase in revenue from implementing new payment channels” — A leading global sports apparel manufacturer and retailer in Germany
For merchants operating in markets where credit cards are not widely used, offering localized payment methods such as wallets and bank transfer methods using QR codes (e.g., PayID in Australia) is crucial to access markets and providing customers with payment choices. IDC’s research highlighted the importance of finding payment partners to provide these options. Failing to do so may result in lost revenue and customers switching to competitors who can offer such payment options.
This emphasizes the importance of continuously evolving and optimizing payment stacks to include new payment channels that align with market needs and customer preferences. Offering a diverse range of payment options can increase revenue and enhance customer experience, loyalty, and retention, ultimately contributing to the competitiveness of merchants in the industry.
Future bets should be placed on more BNPL, crypto and social media
The rapid changes in the payments landscape over the past few years are expected to continue, with new payment types emerging and gaining momentum. This includes variations of BNPL and installment payments, real-time payments, CBDCs, and cryptocurrencies.
Respondents in the interviews identified BNPL and crypto payments as the payment types they would closely monitor in the future for potential shifts in consumer demand.
For example, a leading global fast food chain in Brazil and Latin American markets implemented payment support through social media channels like Facebook based on research indicating unserved consumer desire for such payment options.
As new payment methods continue to evolve globally, merchants will need to be prepared to adapt and ensure that their payment stacks are flexible enough to support these changes and stay competitive in the ever-changing payments landscape.
Navigating Payment Complexity: How Data and Orchestration Drive Success
Payment data is becoming a differentiator for fully optimizing operations
“We will have to work at seeing more visibility into payment costs and performance. Cost is critical to us; we track this data on a daily basis.” — A market-leading ride-hailing company in India
“We plan to leverage data to gain visibility into payment costs and incorporate financial planning into our analysis.” — A leading global hypermarket and grocery retailer in Mexico
A common theme about the importance of clear visibility into payment operation data was observed, specifically related to costs when upgrading the payments stack.
The cost of payments emerged as a prominent metric of interest in the industry.
For instance, a respondent mentioned that AI and IoT infrastructure was implemented to optimize the processing of their payments stack. They utilized data — layered and granularly — to extract greater value and efficiency from their payment investments.
Complexity has created the need for orchestration
”Centralization will be the main goal; we need to reduce complexity across our operations to reduce costs and we need excellent delivery and integration capability from those partners.” — A leading global fast food chain in Brazil
Some organizations utilize up to 20 different payment providers in their payment stacks. This is on top of navigating and complying with diverse regulatory requirements in each market, highlighting the complexity of payment operations. As a result, the need for businesses to rapidly scale their payments, simplify operations, and optimize payment flows has become increasingly crucial.
Centralizing payment management can directly impact internal operations and improve the customer experience. Hence, companies are engineering their own payment engine to gain even more visibility into payment flows and orchestrate them better.
Fraud detection efforts ranked high among future priorities and needs
The balance between ease of transaction and payment fraud rates has traditionally been a singular sliding scale, with merchants setting their preferences for an acceptable fraud rate. However, legacy techniques that rely on rules are becoming less relevant in the face of increasingly sophisticated fraud techniques.
Merchants have shifted their focus from rulebased engines to newer technologies such as AI and machine learning (ML) in fraud detection efforts. These advanced technologies enable more legitimate transactions while keeping fraudulent attempts at bay, improving the overall ratio.
The rate of new attack methods being developed by bad actors means merchants must always be looking to optimize their fraud detection and prevention efforts while minimizing the disruption to the customer experience. One interviewee noted that they wanted to build 3D Secure (3DS) integration directly into the mobile app. Performing verification without redirects to external websites greatly benefits the seamlessness of the payment and allows more data to be collected for future efforts.
Customer-Centric Payments: The Key to Success in an Era of Experience
The shift in framing payment success as part of CX success underscores its growing importance
“The first benchmark is customer centricity, second is in reducing friction, and third is in fast processing.” — A leading global fast food chain in Brazil
Payment success has traditionally been measured using isolated metrics such as authorization, conversion, and failure rates. These metrics have been siloed from other parts of the purchasing experience. However, these metrics will continue to play a crucial role in determining the efficiency of payments.
IDC’s research has unveiled a new perspective from merchants that considers payment success integral to the overall customer experience.
This is in addition to the importance of positioning payments as a business enabler and measuring its success based on those terms.
By shifting the focus of payments within the customer-centricity and customer experience lens, merchants can greatly benefit from understanding the impact of payments on the entire purchase journey rather than viewing it in isolation. This paves the way for developing new strategies and tactics to optimize the journey.
Optimize the payment experience to achieve CX goals
IDC’s research highlights key payment elements, each crucial in enhancing the customer experience.
The first element is optionality, which offers customers their preferred payment methods. Additionally, the research shows that some merchants are exploring the ability to switch payment methods during later stages of the purchase process, such as the collect phase of click-and-collect journeys, introducing new dimensions to the concept of optionality.
The second element is seamlessness, which encompasses checkout speed, customization, user experience (UX), and other innovative features that facilitate smooth and effortless transactions. Platform stability and processing speed are commonly used to measure seamlessness.
The third element is security, where traditional metrics like authorization rates are important. However, initiatives like 3DS have significantly improved security, ensuring enhanced transaction protection.
The fourth element is clarity in pricing throughout the entire process. Transparent pricing and the absence of price shifting or unclear pricing are vital to instilling consumer confidence. This can be measured through abandonment rates, as unclear pricing often leads to a lack of trust and potential customer drop-off.
By optimizing these key elements, businesses can create a customer experience characterized by preferred payment options, seamless transactions, enhanced security, and transparent pricing, ultimately contributing to the overall success of their CX goals.
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Revenue and cost define success in payments
Merchants use various metrics to define payments success, including revenue generation and cost per payment, which are crucial for businesses.
An orchestration platform plays a significant role in gaining in-depth visibility into the cost associated with each payment.
Additionally, another crucial metric is the revenue generated per added payment channel. This is particularly relevant for merchants entering new markets, enabling them to swiftly assess the performance of new channels in generating revenue for their business.
Given the plethora of payment channels available, it is critical for merchants to work with partners who can enable transactions through these channels and provide them with the necessary data metrics to optimize their payment mix effectively.
Strategic Collaboration: Partnerships for Enhanced Payment Experience
Payment partners are needed by businesses to assist in their growth
IDC’s research shows that payment partners’ support and the consulting dynamic they offer can result in productive and healthy relationships.
Successful working partnerships are characterized by offering solutions using technical knowledge, providing best practice sharing, and being dynamic in adapting to changing requirements While costs are always important, payment partners who can understand how to reduce costs through efficient payment routing and orchestration will significantly benefit the business.
Scalability, stability, and flexibility are critical factors for supporting payment initiatives
”We are scaling our online capabilities and need our payments partners to scale accordingly. Massive scalability is needed during sale and event periods.” — A leading global sports apparel manufacturer and retailer in Germany
Having payment partners who can meet the scalability needs of merchants and ensure seamless operations even during peak periods becomes even more significant, as they can assist merchants in dynamically expanding to meet demand.
Reconciliation ability is also a key factor when selecting payment partners. Being able to plug payment data from multiple sources directly into the platform and save on manual reconciliation times was regarded as being a vital feature.
Another critical area is the flexibility to implement and support existing systems and integrate seamlessly with a single integration. With the complexity of payments emerging as a key theme in the research, providing a flexible and customizable solution that can work with complex integrations will be highly valuable in bringing capabilities online in an optimized manner.
Payment partners need to evolve as businesses and payments change
Payment stacks have evolved through various iterations, incorporating upgrades and changes. The ability to deliver a road map of developments and features is a crucial characteristic of the best payment partners.
Respondents identified several key factors they would seek in future partnerships, including improvements in security, enhanced payment support, stability, availability, and regulatory updates.
Businesses are advised to look for payment partners that demonstrate a forward-looking approach to payment trends and future-proofing in their developments.
Payments as a Strategic Lever: Unleashing Untapped Opportunities
The interviews uncovered the companies’ perspectives on leveraging payments as a value-creating opportunity in the future. 1 2 3
Optimizing digital payments to increase company revenues and reduce cost per transaction through an optimized mix of payments and acquiring options, driving customers toward optimal payment mixes for cost savings.
“We need to work further with our partners to reduce the costs of transactions.”
— A leading global fast food chain
in Brazil
Further optimizing payment options to suit the customer needs of different markets through hyperlocalization.
“For each market, we need to analyze trends in each region and do more to serve them with relevant payment methods; by using data, we aim to offer hyperlocalization.”
— A leading global sports apparel manufacturer and retailer in Germany
Innovating with own-branded payments products through payments-as-aservice offerings, allowing merchants to control the payment experience and reduce payment costs.
“There is an opportunity within our (own-branded) payments product if we open up the wallet for use by other vendors.”
— A leading global sports apparel manufacturer and retailer in Germany
“[We need to] see how we can integrate the existing loyalty program into payments.”
— A leading global fast food chain in Brazil
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The Payment Success Playbook
Trend
The rising importance of payments in business strategy. Industry standards now position payments as a key driver of revenue, cost savings, and an opportunity to provide excellent customer experiences.
Large and fast-growing organizations need payment stacks that can support their ambitions
Large merchants now consider complex payment stacks with multiple providers as the norm. The ability to scale this stack and maintain resiliency has become critical.
Changes in payment trends create significant new opportunities that merchants can benefit from. New revenue-generating opportunities arise from payment methods like BNPL, while emerging payment solutions unveil additional avenues for growth.
The rising complexity of payments in 2023 and beyond requires data and orchestration for true success. The best payment performers are distinguished by their ability to gain visibility into payment operations and efficiently orchestrate them.
Leading companies are increasingly placing payments success as a key component of the customer experience. Merchants now view authorization rate-type metrics as an integral part of CX, and no longer consider them the sole measures of payments success.
Companies seeking to enhance their payments experience must find partners capable of continuously optimizing their offerings. Partners who can adapt to the industry’s rapidly changing needs and offer continuous optimization are vital to long-term success.
Key takeaways
Businesses must set high standards for payment experiences, treating them with the same priority as other strategic pillars or risk falling behind the competition.
Multivendor approaches and rapid payment changes mean that a flexible, scalable, and modular payment stack is needed to be competitive.
Capitalizing on opportunities presented by new payments necessitates support from payment partners. Failing to support payment options often means customers turn to competitors who do.
Those who excel in their payment offerings are gaining a competitive edge, while merchants who ignore this risk are falling behind the leaders.
Merchants need to think of payments as an integral part of customer journeys to derive the most success in driving improvements forward.
Companies risk stunting their growth, reducing market access, and limiting revenue gains if they team up with unsuitable partners.
Newer growth initiatives need the right technologies and platforms to launch effectively. 1 7 6 5 4 3 2
Merchants have numerous untapped opportunities to utilize payments as a means to generate new value. Merchants can drive new value by exploring further opportunities in hyperlocalization, optimizing the cost of payments, and owning branded products.
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Validation Through Data: IDC’s Corroborating Views on the Payments Industry
Europe — New payments need orchestration
The global pandemic has fueled the rapid rise of new payment types, such as mobile wallets, BNPL, and cardless payments. According to IDC, BNPL is projected to grow at a staggering rate of 37% annually from 2022 until 2028, surpassing US$200 billion by 2028.
Optimizing and maximizing revenue while improving customer offerings has become crucial for overall operational efficiency with multiple payment channels. As retailers adapt to this changing payments landscape, IDC’s research reveals that their top priority is to gain orchestration and visibility into payment costs. This presents a significant opportunity for banks and fintech companies to offer solutions in a banking-as-a-service (BaaS) model if they possess the necessary capabilities.
Europe BNPL transaction value
Unit: US$ billion
CAGR 22-28E: 37.0%
Americas — Card-like payments are growing
Closed-loop systems or card-like payments are one of the major areas of non-bank-led growth in payments in the Americas. One recent addition to this field is Amazon Layaway payments, the latest development in their strategy to diversify their payment options.
According to IDC’s 2023 research, leading global retailers are placing increasing importance on developing closed-loop payment systems that operate independently from traditional card network rails. This approach is driven by the desire for greater control over customer experience, improved visibility into payments, and reduced merchant fees. These developments aim to provide retailers with enhanced autonomy and flexibility in managing their payment processes, reflecting the evolving landscape of payments in the retail industry.
While this new generation of payment tools builds upon the concept of closed-loop systems, which have been present in global retail for decades
in their branded cards, they offer increased customization and data insights.
USA card-like payments processed
Unit: US$ billion
CAGR 22-28E: 57.8%
Asia/Pacific — BNPL making significant moves
Across Asia/Pacific, real-time payment schemes have come online in the region, and the connected push toward ISO20022 standards is evident.
Southeast Asia’s (SEA) various realtime payment schemes, such as those in Thailand (PromptPay), Malaysia (DuitNow), and Indonesia (BI-FAST); and India with its Unified Payments Interface, have gained recognition as some of the most successful realtime payments projects globally. Both retail and business real-time payment transaction values have experienced a surge in the region. This is aided by the lack of historical card penetration in underbanked markets and government initiatives driven to reduce cash usage through these convenient mobile-driven payment tools.
The next wave of development will focus on further payment data capabilities, which can be activated with ISO20022 standardization across the board and cross-border integration of the various real-time payment
Europe — Payments architecture overhaul
schemes. Australia and the Southeast Asia nations are already deep into the planning stage to make these integrations a reality.
Real-time payments transaction values for Southeast Asia and India Unit: US$ trillion
SEA CAGR 22-28E: 42.3%
INDIA CAGR 22-28E: 55.6%
The European region is witnessing the emergence of significant new infrastructures that will revolutionize how payments are conducted. One of these transformations is the upgrade of real-time schemes, exemplified by the UK’s New Payments Architecture (NPA), which lays the groundwork for enhanced functionalities and increased innovation in the payments sector. The NPA enables new payment types, such as Priority Payment, Instant Payment, Request to Pay, and Same Day Payment.
To fully leverage the possibilities offered by this new infrastructure, banks will need to upgrade their architectures to ISO20022 standards, along with other changes.
Adopting ISO20022 standards brings forth a wide array of data possibilities for all payment stakeholders. The availability of new data sets enables further refinement of the customer experience and facilitates the creation of product layers that align more closely with customer needs. These standards open the door for better integration and customer interaction based on the rich data provided by ISO20022, ultimately
enhancing the overall payments landscape.
The EU bloc is actively digitalizing the single euro payments area, focusing on improving back-end connectivity between countries. Simultaneously, efforts are underway to achieve unity and enhanced integration on the front end for retail and business customers, aiming to make cross-border payments within the EU as seamless as domestic real-time payments.
The EU and Sweden have made significant strides in researching and developing CBDCs. The digital euro and the e-krona have been introduced as potential alternatives to their respective currencies. As of 2023, these currencies are in the advanced stages of planning and feasibility assessment, presenting new opportunities for banks and other stakeholders in the ecosystem to leverage and build upon. Banks with the necessary capabilities can explore layering their products and services on top of these digital currencies, tapping into their potential benefits.
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Business Self-Assessment: Key Questions for Optimizing Payments
The rapidly evolving payment technology landscape prompts several important questions to understand the transformation requirements and prepare for the journey ahead.
Reflect on... Action...
Are you looking for ways to manage your current payment stack better? Gain visibility into costs and improve them.
Does your company view payments as a strategic driver of business?
Is current legacy technology creating constraints on scaling payments?
Are you looking to enter new markets soon and need to localize payments to match local needs?
Are you seeking new ways to create and deploy payment products like wallets?
Can your current payment provider support you with all the payment options you need, such as BNPL or crypto?
Are you looking for ways to upgrade your payments experience security with technologies such as 3DS?
Are you looking to do more with data from payment transactions?
Are you looking at ways to improve the payments experience further and improve metrics such as conversions?
Understand how payment orchestration solutions and more data can help you in your quest to take full control of your payment operations, increase efficiencies, and generate new revenue streams while reducing costs. Understand the difference between the different types of orchestrator solutions and how they may benefit your business with their attributes.
Analyze your payments operations to identify areas where changes can be made to impact your business significantly. Seek assistance from knowledgeable partners in this process.
Re-look at your payments stack and how it is faring in meeting both your current needs from both an internal and customer perspective. Identify solutions including more optimized and modern acquirers if gaps in expectations are established.
Analyze sales segments, products, and different markets to understand the effect of an optimized payments strategy on performance and where gains could be made.
Assess your current payments partners and understand if they can provide new and innovative payments solutions which can help you engage with your customers better. Create a long-term plan to allow for future innovative capabilities in payments.
Understand the new payment types available, their benefits, and how your target segments could want to use them. Devise an integrated strategy to create an optimal payments mix and drive customers toward it.
Look to industry leaders for support and innovation to meet the current and future developments in the payments industry. 1 7 9 10 6 8 5 4 3 2
Are your current payment providers giving you a workable and forward-looking road map for their future developments and upgrades?
Understand the importance of data in payments, and how more data can help you build a greater payments experience. Learn to integrate payment performance with the other parts of the customer journey to obtain a more holistic understanding of the payment journey. Familiarize yourself with the new developments in security, such as integrated in-app 3DS and developments in AI/ML, which could significantly reduce fraud rates and losses.
Consult with both your current and new payments partners to understand their advice and solutions on furthering the payments experience based on their expertise and knowledge.
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ABOUT NUVEI
Nuvei (Nasdaq: NVEI) (TSX: NVEI) is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk and fraud management services. Connecting businesses to their customers in more than 200 markets, with local acquiring in 45+ markets, 150 currencies and more than 600 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.
For more information, visit https://nuvei.com/
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