Payment Trends 2021: Expectations Vs. Reality

The pandemic that started back in late 2019 and is still going strong years from then led to changes in shopping dynamics. Lockdowns and social distancing measures imposed significant challenges to brick-and-mortar stores and forced retail businesses to adapt to the constantly fluctuating situation.

However, alongside troubles such as inflation, layoffs, and supply chain issues, Covid also created new tendencies, especially when it comes to online shopping. Let’s take a closer look at how the payment industry trends in 2021 turned out to be compared to the forecasts.

2021 Payment Trends Predictions

While some experts believed that the COVID-19 pandemic’s acute stage was to come to an end in 2021, there were plenty of opposing opinions circulating in the press. Consequently, the forecasts regarding the 2021 payment trends typically weren’t matching from source to source.

In this list, we’ve collected some of the most popular predictions:

1. Cloud-Based Payment Systems

Сloud-based payment systems enable businesses to accept money transfers using virtually any digital device. Such transactions include a variety of financial operations, from contactless credit card payments to online orders.

The flexibility, scale, cost-effectiveness, security, and repeatability they offer don’t have analogs among existing alternatives. All these factors combined made it safe to assume that the cloud-based technology would cover the growing demand for frictionless online shopping and the minimization of late payments in 2021.

2. Digital Wallets and E-Wallets

E-wallets perform functions similar to a traditional wallet, with money needed to be loaded to make purchases. Digital wallets play the same role but are linked directly to a user’s bank account.

With the COVID-19 restrictions, it was only natural for people to look for simple and fast ways to send money, pay utility bills, recharge mobile phones, and buy products without leaving home, so digital wallets and e-wallets came to the rescue.

Digital wallets were expected to become a $2.4 trillion industry in 2021, with the transactions’ value increasing by nearly 24% compared to 2020, justifying their position in the list of forecasted trends.

3. Cross-Border Transactions

While the traditional form of cross-border payments was expensive and slow, these transactions are currently evolving and leaving their main imperfections behind.

Nowadays, payment service providers enable users to receive money in a matter of 24 hours or even several minutes.

The forecast for 2021 due to restricted travel was that the volume of cross-border transactions would rise. For instance, in 2020, even with travel and trade struggling, such e-commerce payments increased by 17%. They were expected to follow their long-term 6-7 percent growth trajectory in 2021, reaching $2.5 trillion by 2025.

4. Real-Time Payments

Real-time payments, or RTPs, have undeniable advantages, such as impressive speed, convenience, and security. These transactions are based on the faster payment principles established by the Consumer Financial Protection Bureau (CFPB).

The global RTP market size in 2020 was estimated at $10.64 billion and was forecasted to increase at an annual growth rate of 33% in the years 2021-2028.

RTP systems feature in-built functions, such as:

• Cash management
• P2P payments
• In-app shopping
• E-invoicing
• Splitting the bills
• Insurance services
• Claim settlement

The list goes on, making it easy to understand why real-time transactions were a common prediction for becoming a payment trend in 2021.

5. P2P Payments

The P2P payment method enables a convenient transfer of funds between several parties through an app using their banking accounts or credit cards.

The global peer-to-peer transactions market accounted for approximately $1,85 million in 2019 and is expected to reach $4,49 million by 2027. With such impressive dynamics, it is no surprise that P2P payments were forecasted to be among the leading trends in 2021.

5 Main Payment Trends of 2021 Recap

While the listed trends predicted for 2021 did take place and played an important role in the payment industry, there were other tendencies that stole the spotlight:

1. Contactless Payments

What initially was a response to the COVID-19 outbreak has become the new normal for shoppers worldwide. These days, instead of reaching out for cash, it is enough to swipe a card or smart device over a payment terminal.

In 2021, many organizations adopted this form of payment and were reaping the benefits, such as:

• Increased customer satisfaction
• Simper reconciliation
• Faster transactions

The National Retail Federation conducted research, according to which 67% of surveyed retailers in the US accept some type of contactless payments. In Europe, over 75% of in-store Visa payments are contact-free.

2. Omnichannel Retail

For clients of many businesses, it’s already impossible to draw a line between a store’s online and physical presence. That’s the achievement of omnichannel retail that ensures that services, such as order placement, click-and-collect, and loyalty points synchronize seamlessly.

During the year marked by the pandemic going strong, it was crucial to improve customer experience as much as possible. Hence, over 47% of companies in North America and Europe recognized the importance of omnichannel retail in 2021, and experts predicted market growth to $5.01 billion by 2023.

3. Buy Now, Pay Later

BNPL became an important shopping feature already in 2020, as many people were affected by layoffs and financial shortages due to the pandemic. At that time, approximately 33% of consumers aged 18-37 admitted that the possibility to pay in installments had an influence on their decision to purchase something.

In 2021, BNPL’s global market share reached 2.1% and keeps increasing - looks like this trend is here to stay.

4. Embedded Payments

Globally, there’s about $120 trillion worth of B2B transactions processed annually, and yet some of the tech platforms that facilitate such transactions don’t earn on them.

Embedded transactions are based on integrating a payment facilitator (PayFac) to a B2B platform. PayFacs share a part of the payment processing revenue with their clients while simplifying and speeding up the algorithm.

In 2021, embedded finance experienced a boom and is not planning to stop there - it’s expected to generate $230 billion in revenue by 2025 and $7 trillion in 10 years.

5. All-in-One Payment Solutions

In 2021, the tendency of merchants trying to minimize payment integrations to lower the costs and maintenance became evident.

After all, when a merchant uses multiple payment systems to appeal to a wider audience and cover various payment methods, the integrations turn out to be high-maintenance and expensive. Challenges also affect data aggregation and standardization.

That’s why many organizations have been opting for all-in-one payment providers, and it’s yet another trend that is likely to stick around.

What Will 2022 Bring for the Payment Industry?

Many publications were correct when forecasting the 2021 payment industry trends, while others directed their expectations toward tendencies that turned out to be less impactful. However, the general direction of the payment landscape’s evolution was unmistakable, incorporating the following vectors:

• A significant decline in cash payments and an increase in digital and contactless transactions
• A growing interest in all-in-one payment solutions
• A noticeable preference toward extra-fast or instant transactions

With these factors in mind, it is possible to speculate regarding the development of the payment industry in 2022.