Payment Industry Trends 2023 Rundown: Expectations Vs. Reality

As 2024 approaches, it can be tempting to start looking into payment industry predictions. Yet, before delving into future trends and developments, it is crucial to review the past year’s valuable lessons. In fact, one of the most important questions that can be asked during such a reflection is: “Did the industry trends match the experts’ predictions given at the beginning of 2023?”

By answering it, you can get a better grasp of the payments landscape’s current state and enhance your critical thinking when it comes to evaluating the forecasts’ accuracy. This overview is a great place to start - we have analyzed all the factors that were expected to shape the payment scene this year and compared them to the actual top industry trends that emerged in 2023. Let’s dive in!

Top Predictions for 2023: What Did Payment Industry Experts Expect?

The key tendencies that were expected to drive payment progress this year were the following:

1. The Blend of Online and Offline Shopping

Ever since the Covid-19 outbreak, we’ve been noticing the growing importance of eCommerce. However, as social distancing measures have loosened, we also saw that consumers are still interested in visiting brick-and-mortar stores despite the convenience of online shopping.

In fact, according to the latest studies, despite the majority of European consumers claiming to prefer making purchases online, physical stores remain dominant in 2023. This is particularly true for the UK, Germany, France, and Spain, where over 75% of consumers opt for offline outlets.

At the same time, surveys show that only a small percentage of people stick to a single online or offline channel, which indicates that, as forecasted, hybrid shopping and omnichannel commerce are thriving.

2. Continued BNPL Growth

Buy Now, Pay Later services have also seen impressive growth throughout the pandemic years, driven by layoffs and decreased consumer purchasing power. In fact, BNPL transactions accounted for 5% of the global eCommerce transaction volume in 2022, and their prominence is expected to continue increasing at a CAGR of 16% until 2026.

While the full statistical data for the past year will be published at the beginning of 2024, insights from H1 of 2023 revealed by various service providers already leave no doubts that the prediction regarding BNPL’s continued growth was correct.

For instance, Sebastian Siemiatkowski, CEO of Klarna, expressed his excitement about returning to black numbers and being ahead of the set targets in Q2 of 2023. Notably, at that moment, the company achieved an impressive 17% YoY revenue growth and celebrated significant success in integrating AI-driven solutions into its operations.

Another great example proving BNPL’s progress in 2023 is Affirm, a service provider that signed an exclusive deal with Amazon, one of the world’s most renowned eCommerce giants.

3. Expansion of QR Code Payments

In 2022, the QR code payments market was estimated at $11.2 billion. In 2023, it is said to have exceeded $11.67 billion. What’s more, this figure is expected to grow nearly fivefold in the next 10 years, making it obvious that all those who predicted QR codes to be a major industry trend were right.

Currently, this tendency is particularly prominent in Southeast Asia, yet European merchants and consumers are also actively embracing it.

4. The Rise of E-Wallets & Super Apps

The rapidly increasing usage of digital wallets is a payment industry trend that can be seen with the naked eye. However, there is also plenty of data backing this fact up - for instance, e-wallet transactions have summed up to $9 trillion in 2023. Moreover, this figure is forecast to reach $16 trillion by 2028.

As you can imagine, such impressive digital wallet expansion is reflected in a variety of aspects, one of them being the rise of super apps. Modern e-wallets often go beyond simple payment functions, offering users a one-stop solution for various everyday activities. Some examples of super apps you are most likely familiar with include WeChat Pay, Cash App, and Revolut.

In fact, the latter is estimated to bring $1.9 billion in revenue by the end of this year, proving that the super app trend is here to stay.

5. Increasing Prominence of In-App Purchases & Tips

As of October 2023, 50% of non-game and 79% of game apps enable users to make purchases without visiting any third-party platforms. What’s more, consumers spend over $380 billion on in-app shopping, which makes this feature an indisputable trend in the payment industry.

Besides, just as predicted at the beginning of 2023, we see more and more applications enabling users to leave tips. This tendency is present across a variety of spheres, from streaming platforms to ride-sharing services. Besides, some big companies, like DoorDash, are introducing initiatives to promote in-app tipping, which indicates that this trend is set to continue in the foreseeable future.

Did the 2023 Forecasts End Up Being Accurate?

Looking back at 2023, it is clear to see that the expectations that were set for the payment industry matched the year’s outcomes. Besides, it is evident that the majority of these trends will continue gaining steam in the future.

However, while the factors mentioned above were definitely important, there were even more game-changing developments that took center stage in 2023. Without further ado, let’s take a closer look at them!

Which Trends Were Actually Shaping Payments in 2023?

These tendencies are reflected in the key trends that kept gaining traction and changing the global payments landscape throughout the year, namely:

1. Open Banking Initiatives

Open banking is a concept that enables third-party access to financial data via application programming interfaces (APIs). It has taken the world by storm, with the ratio of financial institutions recognizing its significance increasing from 50% in 2019 to 89% in 2023.

Modern open banking initiatives are continuing to reshape the financial landscape, fostering competition, driving innovation, and enhancing the overall customer experience. Some of the countries that have been driving progress in this sphere throughout the year include China, Brazil, Australia, Japan, Germany, and the UK.

2. Blockchain Technology

Blockchain technology within the banking and financial services sector is estimated to have experienced 62% growth in 2023.

This is due to the fact that organizations worldwide are increasingly adopting blockchain solutions to monitor and facilitate real-time transactions. What’s more, the rise of decentralized finance (DeFi) within the blockchain space is fueling innovation in emerging technologies, which, in turn, contributes to the evolution of commerce.

While blockchain is already regarded as transformative, we are currently only starting to tap into its potential, so we are sure to see new implementations of this technology in the upcoming years.

3. Digital Currencies

At present, 130 countries, accounting for 98% of the worldwide economy, are looking into the possibilities of implementing central bank digital currencies (CBDCs).

Even more impressively, approximately 50% of them are already in advanced, pilot, or launch phases of development. Some examples of the countries that were actively working on their CBDC projects in 2023 include Australia, Thailand, Brazil, India, and South Korea.

The rise of CBDCs is a truly exciting payment trend, as it has the potential to completely transform the global financial system, making it more inclusive, cost-effective, and resilient.

4. Real-Time Payments

Real-time payments (RTPs) have been a hot topic for years now, with 2023 being no exception. This comes as no surprise, as the RTP market is expected to increase by more than $55 million by 2027 at an impressive CAGR of 31%.

It is worth mentioning that in 2023, the Asia-Pacific region was the leading contributor to RTPs’ growth, accounting for 70% of the global figures. Another notable progress was seen in the US as it launched FedNow, the country’s national instant payment service, on July 20.

5. Metaverse Transactions

The metaverse is keeping the world on its toes. In the payment context, it could mean new virtual economies, innovative digital assets, and transactions conducted within immersive online environments. Additionally, it also creates new marketing opportunities that many fintechs and other forward-looking organizations are actively exploring.

Therefore, despite the investments in the metaverse plummeting significantly over the past year, new developments by such payment industry giants as Visa, Mastercard, and PayPal, suggest that there is still plenty of potential in this virtual ecosystem.

6. Artificial Intelligence & Machine Learning

AI and ML continue to be all the buzz across a variety of spheres, including the payment industry. In 2023, we saw this technology being implemented in many aspects, namely:

• Payment processing automation
• Fraud detection and risk management
• Customer service
• Personalization
• Transaction data analytics
• Biometric authentication

As you can see, there is a plethora of AI & ML use cases in the payment space, and as technology advances, we are sure to see more exciting application areas emerge.

A Peek into 2024: Which Trends Should We Expect to Take Over?

Overall, the year 2023 was fundamental in terms of solidifying the existing payment infrastructure and enriching it with new technological solutions and regulatory approaches. This process is essential for ensuring that the payments landscape is future-ready and resilient. Yet, now that we’ve seen many advances in this regard, it is only natural to ponder what we can expect from next year.

Aside from the continued evolution of the developments listed in this overview, 2024 is likely to see the following payment industry trends:

• Significant decline in cash usage
• Advanced use of biometric payments
• Enhanced personalization of payment services
• Intensive cybersecurity innovations in response to sophisticated fraud

All of these factors are expected to play a transformative role in commerce and finance, reshaping the way individuals, businesses, banks, PSPs, and FIs handle transactions. Stay tuned to the Payneteasy blog to keep up with all the latest developments in the global payment sphere in 2024 and beyond!