2021’s Year of Payments

The overwhelming outlook for payments in 2021 is that as the landscape is set to continue on its path of digital maturity, it will also become more diverse.

With more options entering an increasingly advanced market – following a year that has mandated a global shift towards the digital – Mastercard found that at least 20-30% of Covid-19 related surges in e-commerce will become permanent in 2021.

So, let’s break down our own projections for 2021’s year of payments:

An increasing preference for digital banking and payments

At the tip of the iceberg is the continued move towards digital payments and the uptake in online banking – whether that be via mobile or desktop.

With 59% of consumers in the UK alone concerned about the hygiene surrounding payment hardware, an increasing number of digital payments are even being made at physical points of sale.

In fact, 41% of consumers that once preferred cash have switched to cards or other digital payment methods (such as digital wallets or QR codes) in light of the pandemic.

Equally, a majority of stores discourage the use of cash as a payment method with the FCA recently raising the contactless limit from £45 to £100 following the UK’s exit from the EU. This amount had already been raised from £30 due to COVID and is higher via digital wallets.

According to Visa, roughly 75% of in-store payments in Europe are now made with a contactless form of payment.

Buy Now, Pay Later Schemes

It goes without saying that financial risk was even greater and that much more difficult to sign up for in 2020, and 2021 doesn’t seem to be much different. Joining Millennials in a wide-spread mistrust of credit card schemes, the uptake of BNPL schemes is set to increase.

In fact, only 33% of millennials have a credit card, preferring to regularly pay by debit card and BNPL schemes.

As 10 million consumers in the UK say that they’d avoid retailers who don’t offer BNPL schemes, another 33% of millennial shoppers worldwide said that the option of paying by instalments at the checkout influenced the decision to complete a purchase.

Tokenisation

Last year, Card Schemes Visa and Mastercard partnered to accelerate the adoption of tokenisation and payment security across digital payments.

Already covering a large proportion of payments, these issuers will account for a mass uptake in secure checkout processes across the e-commerce space.

Tokenisation also facilitates account updater facilities and in-app payments allowing for streamlined and quicker checkout processes within a number of commerce channels.

To learn more, click here.

Increased Payment Security

Businesses within the UK have until September 2021 to ensure that they’re fully compliant with PSD2 SCA regulations – a payment standard that came into force last year and with it – an increasing demand from regulators and consumers for better payment security features online.

Whilst compliance is one thing, maintaining frictionless customer experiences is another.

With this, 2021 is set to see the rise and evolution of payment security including the necessary authentication measures that include a multi-factor response or biometrics.

The question is, how will this evolve further? With some predicting the rise of voice biometrics.

In response to this growing demand, investment in digital identity solutions is expected to increase from $13.7bn in 2019 to $30.5bn by 2024.

Advanced Fraud Prevention Methods

A consumer shift towards e-commerce will inevitably bring with it a rise in fraud and call for long-term and mitigative solutions against online threats.

Already, ransomware and other fraudulent attacks have increased by 148% in March 2020 compared to the month before and is expected to increase a further 130% by 2024. Whilst fraud and chargebacks has been a topic of concern for all business pre-pandemic with 57% of e-commerce merchants agreeing that they struggle to balance fraud prevention with a seamless customer journey, Acquirers and Gateway providers are set to invest in advanced fraud prevention methods in 2021.

Whilst the implementation of AI and machine learning is not new, it certainly is recent and is set to become a standard in 2021 with banks expected to increase their spending on AI and machine learning technologies by 15% from 2020 to 2024.

Real-Time Payments

As the demand to create sales anywhere increases, connection driven payments made via WIFI, 4G or even 5G, will facilitate the demand for real-time payments.

Set to increase at a CAGR of 25% between 2020 and 2025, real time payments spell the end for the traditional checkout. With 53% of consumers (via a study conducted by Paysafe) believing that Amazon-Go style checkout-less stores are the future of retail.

Realtime payments mark an increase in liquidity and insights, and a decrease in risk for merchants of all sizes.

Subscriptions

Whilst many of us have benefitted from our subscriptions as a coping mechanism throughout this pandemic, the uptake in subscription services goes beyond the obvious the selling point.

Providing an incremental stream of revenue to merchants and a pay-by-instalments option for millennial consumers, the technical benefit is this: a subscription-based service reduces the number of transactions subjected to authentication protocols.

In fact, only the initial payment is.

According to Zuora, 74% of consumers will subscribe to services over owning physical goods in the future. By 2023, it is predicted (Gartner) that 75% of B2C businesses will offer some form of subscription service to consumers.

Whilst the digital shift certainly feels exclusive at the time of this article, a trend toward open commerce seems more plausible with consumers paying more attention to sustaining local businesses and ethical shopping than ever before.

Take a look back at the year of payments for 2020.

Sources

[Source 1](https://www.paymentsjournal.com/what-are-the-5-popular-payment-trends-of-2021/)

[Source 2](https://www.adyen.com/knowledge-hub/reports/retail-report-new-beginnings?gclid=Cj0KCQiA6t6ABhDMARIsAONIYyxJm9x4avq9zKtbP07egAsJKLeuNv5ziXoVeO6ylV9mWgZCCAhA04IaAsHhEALw_wcB)

[Source 3](https://www.forbes.com/sites/jordanmckee/2021/01/28/payments-in-2021-five-trends-driving-industry-transformation/?sh=4a0aa79f2ef3)

[Source 4](https://www.entrepreneur.com/article/363921)

[Source 5](https://home.bluesnap.com/snap-center/blog/5-payment-trends-that-will-shape-2021/)

[Source 6](https://www.capgemini.com/wp-content/uploads/2020/11/Payments-Top-trends-2021-web.pdf)

[Source 7](https://www.financederivative.com/the-payment-trends-shaping-2021/)

[Source 8](https://www.paysafe.com/de-de/paysafe-insights/what-happens-next-10-payments-trends-in-2021/)

[Source 9](https://usa.visa.com/visa-everywhere/security/secure-digital-payments-through-tokenization.html)

[Source 10](https://www.paymentsjournal.com/what-are-the-5-popular-payment-trends-of-2021/)

[Source 11](https://www.klarna.com/uk/bnpl-and-the-new-economic-landscape/)

[Source 12](https://www.fca.org.uk/news/press-releases/fca-confirms-increase-thresholds-contactless-payments)

[Source 13](https://newsroom.mastercard.com/mea/press-releases/mastercard-global-outlook-2021-highlights-permanent-shift-to-digital-and-opportunity-to-boost-financial-inclusion-in-the-middle-east-and-africa/)

[Source 14](https://newsroom.mastercard.com/mea/press-releases/73-of-uae-consumers-are-shopping-more-online-since-the-start-of-pandemic-reveals-mastercard-study/)

[Source 15](https://ae.visamiddleeast.com/en_AE/about-visa/newsroom/press-releases/prl-19052019.html)

[Source 16](https://ae.visamiddleeast.com/en_AE/about-visa/newsroom/press-releases/prl-07022018.html)

[Source 17](https://thepaypers.com/interviews/managing-fraud-successfully-when-navigating-the-digital-shift–1246588?utm_campaign=20210112-automatic-newsletter&utm_medium=email&utm_source=newsletter&utm_content=&utm_source=newsletter&utm_medium=Email&utm_term=&utm_content=&utm_campaign=)