With 24.4% CAGR, the digital payment market size is expected to be worth USD 19.89 Trillion in 2026.
While the stats have not yet been confirmed, this past year may have been the biggest year yet when it comes to digital transformation and innovation in the payment space. After two pivotal years, spending and payment methods took on new forms. And businesses learnt, adapt fast or lose market share.
The game has changed; it is no longer simply cash, cheque or credit card. Today’s world of payments is propelled by Open Banking, APIs, real-time payments and embedded finance. With a more diverse payment landscape and so many different payment options available, consumers want the ability to select a payment solution that works best for them.VoPay CEO, Hamed Arbabi
Embedded finance is a solution that many of us weren't even aware we needed. It streamlines the entire purchasing process for the end user while at the same time delivering new revenue streams for the organization. It is the emerging trend that allows brands to deliver everyday financial services directly to their customers without relying on regulated financial services providers. Companies can offer and sell financial products to their customers where they are – in their buying journey through a single API. Embedded payments are an integral component of the embedded finance experience.
The International Data Corporation IDC predicts that 74% of digital consumer payments globally will be conducted via platforms owned by non-financial institutions by 2030. Moreover, the Forbes article cites the industry growth at revenues growing from $43 billion in 2021 to $138 billion in 2026.
• A better customer experience
• Enhanced brand reputation
• The ability to grow revenue streams
• Increased ROI
• Decrease in transaction cost
• Automated and digitized offering
• An optimal operational environment
Fundthrough delivers thirteen embedded finance payment solution use cases likely to thrive in 2023. If we use insurance as an embedded finance example, then we need to look no further than Tesla. Through APIs and embedded finance products, Tesla is building the framework to capitalize on a significant new revenue stream. It is expected that 30-40% of the company’s future value will be derived from the insurance revenue stream.
Just like Uber before it, expect the Tesla customer experience to raise the bar and set a new standard. One site will deliver the product and any accompanying financial services required. It will be a superior journey from purchasing to paying with financial savings that can be passed on to the consumer. ( Tesla reports passing on somewhere in the neighbourhood of 20 to 30 percent to their clients.)
As more and more companies look to embedded payment solutions in 2023 to help them gain a competitive advantage, the team at VoPay looks forward to supporting clients to suit this growing demand. Our Fintech-as-a-Service platform allows any company to seamlessly integrate financial services into their existing applications, products, or services through a single, scalable API.
This financing option allows customers to make purchases instantly and pay for them later exploded in 2021 in the B2C world, and the momentum continued to roll throughout 2022. While the uptick of BNPL in the B2B payments space hasn’t been overly significant, we still wouldn’t discount this trending payment option. The Canadian Lenders Association found 53% of business owners and senior decision-makers would consider a financing solution at checkout where payments can be made in installments over time. We still say Canada’s first B2B BNPL solution, Tabit remains one to watch!
Innovation delivers a powerful punch to A2A payments making them a merchant’s dream. In 2020 FIS’ Global Payments Report 2020 predicted that A2A payments would account for 20% of all e-commerce payments, surpassing debit cards and credit cards in 2023. Already up 21% from 2020 to 2021, EFT (electronic funds transfer) payment solutions lead the way.
Earlier this year, when Visa and Mastercard gave small businesses the power to add a surcharge to some credit card transactions, the high costs of credit card fees became a hot topic. Previously, companies were known to absorb these interchange fees, and now business owners can pass them on to their customers.
Be it the embracement of new payment technology, a continual shift to contactless payments, and an imminent Open Banking arrival, account-to-account (A2A) payments continue to take center stage.
Historically, A2A payments were less popular than other payment methods. Manual bank transfers required payers to log into their bank accounts every time they wanted to make a payment, and recurring payments often meant an arduous process. With Open Banking in place, account-to-account payments have become easier. Not to mention they are faster, cheaper, and more secure. Open Banking allows businesses to gain real-time access to consumers' financial data, deliver an improved customer experience and offer better risk management. Most importantly, however, it means consumers have complete control over their financial data.
Interac reported a milestone this year of 1 billion Interac e-Transfer transactions. If we ever needed more proof of the growing relevance of seamless online, real-time payments in the business world, this could be it. In April of this year, 19% of all Interac e-Transfer transactions involved a business, and that number continues to grow. Real-time payments (RTP) are sent, received and settled almost instantaneously. No matter the time of day or day of the week – this is the new way of faster payment processing. As adoption accelerates, the industry is expected to hit US$ 16 Billion by the end of this year, with forty-six countries deploying real-time payment solutions. Real-time payments became the answer as companies looked for new ways to optimize efficiencies, scale up in the market, and increase their bottom line.
Right now in Canada, there is also a lot of excitement around open banking and real-time payments, as both will be transformative for the payments industry and businesses alike over the next couple of years. As today’s consumers demand faster and easier access to services, we need to create solutions that work for today while also thinking ahead to the next 5-10 years and how the technology will evolve again. Our goal at VoPay is to leverage evolving technology to help companies adapt alongside their consumers.
Like the year preceding it, 2022 was a pivotal year in the payments space. As companies continue to place digital transformation as a significant focus staying ahead of trends becomes critical. Understanding and integrating embedded finance solutions will ensure organizations can stay ahead of the market by providing the best experience to their customers.
With a focus on what’s to come in 2023, we look forward to helping our clients stay ahead of the curve. Deploying new technologies to capitalize on trends, from embedded finances to real-time payment solutions, we’re here to ensure that our clients have the tools they need to create compelling payment experiences to become industry leaders.