Understanding Major Payment Trends that Will Shake Up Banking in 2022
In recent years, the mainstream financial sector has seen a lot of changes, with the pandemic driving rapid business digitalization and an overall shift to online commerce and solutions that enable consumers to make purchases in more convenient and secure ways. As we head into 2022, the fintech landscape continues to grow and evolve to meet the desires and needs of the consumer, further shaking up traditional banking trends and methods. Here are some of the trends to follow in 2022.
The popularity of alternate payment methods continues
Person-to-person (P2P) transfers involve the transfer of funds from one individual’s banking account into the banking account of another person. Before the pandemic, consumers had already embraced these applications as a way of sending friends and family money and paying for purchases. P2P payment applications, such as PayPal, Venmo, Apple Cash, and Square’s Cash, have established a substantial head start in the fintech market. Starting as true person-to-person payment systems, they quickly moved into consumer-to-business payments, helping them grow quickly and providing an advantage over traditional banking offerings. They continue to build on that advantage by implementing additional features to operate as fully integrated payment suites. Banks will develop fintech to compete with these offerings but face challenges in keeping up with the most popular P2P applications.
Buy Now Pay Later (BNPL) will grow as a purchasing option
Payment processing trends like “buy now pay later” have become increasingly popular, especially among younger Millennial and Gen Z consumers, many of whom are struggling to establish themselves financially. Both a form of payment and a form of financing, BNPL offerings have increased, especially with big market players like Amazon and Walmart offering the option. Banking goals and consumer desire will continue to drive demand for more BNPL options in 2022. Still, an inquiry opened in December 2021 by the Consumer Financial Protection Bureau (CFPB) into the major BNPL companies may put a damper on growth. The CFPB is interested in how BNPL options affect consumers’ debt accumulation. They are also investigating if BNPL providers are properly evaluating how consumer protection laws apply to their products and how these providers are harvesting and possibly monetizing data about their borrowers. We’ll learn more in 2022 on how these investigations will affect BNPL going forward.
Zelle will continue to struggle to build market share
Zelle is the traditional banking sector’s response to P2P, offering customers the ability to send money to friends and family from their banking apps. Recognizing that P2P was more than a fad, banks developed Zelle to compete with P2P in the marketplace. However, as the conventional banking sector’s P2P solution, Zelle faces an uphill struggle to build market share, even with a successful transaction volume. Currently, Zelle still does not offer the option for consumer-to-business payments to avoid competing with traditional payment forms that banks provide. This lack of payment ability will continue to make it harder for banks to compete with their fintech rivals, especially as these rivals continue to add additional features and payment functionality to their applications.
Traditional payment methods will still lead the pack
As the pandemic continued in 2021, the financial sector was positioned to benefit from an accelerated transition to digital payments. Nonetheless, while alternate payment methods continue to grow in popularity, traditional debit and credit cards, and even cold, hard cash, still lead all payment methods. Activities such as purchasing groceries, where consumers once preferred a touchless payment card, moved online during the pandemic and drove the desire for more traditional payment methods as people shopped online from their homes. Heading into 2022, the fintech industry faces an uphill battle to displace tried and true payment methods for consumers.
A Mixed Financial Landscape Going Forward
All indications for 2022 point to a mixed payment ecosystem that includes existing technologies and innovations delivered with a new sense of purpose. With the convenience of technologies such as embedded biometrics, the pandemic was just what digital wallets and P2P applications needed to continue unfolding and growing to their full potential. Together with pandemic-related policies, such as vaccination passes and COVID check-ins, embedded biometrics and other cutting-edge technologies represent a new way that commerce will continue to adapt to the fintech innovations driven by the ongoing coronavirus pandemic and other challenges.
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