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Persistence will pay off for payments industry leaders in 2023
“It’s an understatement to say 2022 was challenging for the fintech and payment industry. The impact of Covid created a dramatic shift in e-commerce, spending habits, and payment preferences. Cybersecurity was top of mind while the industry looked for ways to do things faster, more efficiently, and more profitably. In taking the pulse of our industry colleagues about the year ahead, there is a mix of realism and cautious optimism.”
I get a sense of determination and willingness to create and embrace new technology and take on new collaborations. Ruben Salazar points to broader financial inclusion. Chris Staymates expects M&A growth despite or due to lower valuations. Alessandro Della Volta is optimistic version 4.0 of PCI DSS will improve security for the consumer’s payment journey.
Elizabeth Kowal hopes technology buyers and vendors will stop pointing fingers at each other and innovate together. Yang Lan says the ripple effect of the failure of FTX will continue as exchanges get intense scrutiny from regulators and Soulbound Tokens (SBTs) edge toward the mainstream. Shivani Siroya believes fintech innovation can pave the way to better “financial citizenship.” Finally, Daniel Molina wonders if biometrics can help us win the growing digital identity and cybersecurity arms race.
These industry leaders generously offered their take on what’s ahead in 2023. I think persistence will pay off for industry leaders as we tackle the impact of inflation and a downturn in spending in the year ahead with agility and innovation. ~ Douglas Hall, CEO, EQUE Corp, entrepreneur, investor, Publisher, PaymentsNEXT
A financial inclusion breakthrough ahead?
According to recent research by The World Bank, more than 1.4 million adults remain unbanked globally. To reach these individuals, organizations must create gateways for financial inclusion and lower barriers to make financial services easily accessible.
In 2023, we’ll reach a turning point in the industry’s collective ability to serve the under/unbanked populations of the world, with digitized payments playing a huge role in bringing these individuals into the formal banking system.
From new send-to-wallet capabilities to leveraging contactless payments for transit, these are just a few examples of where we’ll see progress in using payments to aid financial inclusion. ~ Ruben Salazar Genovez, Global Head, Visa Direct
Economic uncertainty, M&A potential boom, payments-led growth?
In 2023, fintech M&A will heat up as companies look to add value to their solutions through new offerings like financial services. With economic uncertainty likely to continue well into 2023, valuations will be lowered, further contributing to the M&A boom.
Embedded finance will also help fintechs and ISVs stay afloat. It offers a new revenue stream for ISVs and will set fintechs up for success through a recession and beyond by making it easier to implement new payments technologies in the future.
SaaS and tech companies will get even more involved in payments-led growth this year. Payments-led growth is a strategy for companies to drive revenue by integrating payments within their product. Elon Musk has already teased payments for Twitter, and earlier this year, Apple announced plans for its BNPL platform Apple Pay Later, through which Apple will underwrite and fund the loans itself. This involvement will only increase in 2023 as Big Tech will look to add value to its services and create a complete commerce experience. ~ Chris Staymates, Chief Technology Officer, Stax
Security is still top of the agenda in 2023
Despite the constant evolution of the financial landscape, consumers are still prioritizing a seamless and safe payment journey above all else. New technology and payment methods will be at the forefront of the industry in 2023.
With customer service as a top priority for companies and consumers open to new options, the payments landscape is primed to expand and evolve over the coming year.
On the horizon is the proposed American Data Protection & Privacy Act (ADPPA) legislation currently being discussed and the countdown to implementing version 4.0 of PCI DSS continues in earnest in 2023. In 2023, companies will need to have a firm understanding of secure payment methods and be ready to pivot as the legislation landscape evolves in the next 12 months. ~ Alessandro Dalla Volta, VP of Product at PCI Pal
Buyers and suppliers stop pointing the ePayments finger at one another
E-payments are a win-win for both buyers and their vendors. Buyer AP teams get more cost-effective and secure payment methods along with increased visibility and control. In some cases, they can reduce their payable-related costs by as much as 80%. At the same time, vendors enjoy faster payment with rich remittance data that enables easier reconciliation and reduced AR costs.
Yet, despite the apparent mutual interest, buyers and their vendors continue to name each other as the biggest obstacle to furthering ePayment adoption. In a 2022 MineralTree survey, 57% of finance leaders cited vendor unwillingness to accept e-payments types as the top reason impeding growth. Conversely, 63% of vendors identified the primary obstacle to ePayments being customers not ready to move away from checks.
In 2023, buyers and vendors will close the gap, compelled by the significant business benefits for themselves, the market realities of a potential recession, and the need to make their operations as efficient as possible. Solution providers can also assist by helping buyers and vendors understand their mutual interests and overcome the obstacles to broader e-payment adoption. ~ Elizabeth (Elle) Kowal, Chief Operating Officer, MineralTree
Saga of FTX will impact DEX, CEX, with SBTs ahead
The collapse of FTX has everyone wondering: will this disastrous saga finally be the straw that breaks the camel’s back when choosing DEX (decentralized exchanges) over CEX (centralized exchanges)? I bet 2023 could be the year of the move from CEX to DEX: a Dune analytics report already suggests that the FTX bankruptcy “has led to a truly stunning uptick among DeFi protocols and decentralized exchanges,” with some DEX options seeing a near 75% user increase in just a few weeks.
Should the move not be so quick, CEX will still be highly and strictly regulated, as lawmakers and legislators will keep a close eye on them moving forward. Client protection will understandably take priority over everything else, and client’s assets will be safeguarded by banks more and more.
Banks will also have a bigger role in verifying Soulbound Tokens, or SBTs, which I predict will become the main link between CEX and DEX in the future economy. SBTs are digital identity tokens that cannot be transferred and make up the foundations of how we might rethink the notion of “identity.” SBTs represent traits, features, and different parts of an individual’s life, for example, a “medical” soul for every health record someone could collect or a “credential” containing their work history. They are a relatively new concept, and I believe 2023 will be the year they go mainstream and conquer the crypto community’s heart.
Lastly, we may see a bit of a battle between non-custodial wallets, which lets you have exclusive control over your assets as opposed to a service that keeps your funds safe, as these become a more familiar concept and grow in popularity. ~ Yang Lan, Co-founder of neobank Fiat24
Can tech innovation lead to better financial citizenship?
In 2023, emerging markets and underestimated communities will reap the benefits of frictionless payments. As ESG emerges, so will a key question: is this financial solution empowering a financially healthy population? Financial institutions and fintechs will need to reassess their efforts: are their financial solutions truly empowering financially healthy populations?
How can we as an industry do better and foster financial citizenship? While financial inclusion ensures equitable access to financial services, to achieve financial citizenship, inclusive financial products must exist alongside the necessary education for the consumer. This is not an easy solution but when done correctly, financial citizenship has the potential to allow everyone to be represented in the ecosystem of financial services, empowering them with the tools and education to participate in the financial system. ~ Shivani Siroya, Founder & CEO, Tala
Who will win the digital identity & cybersecurity arms race?
Last year was another year of seismic change in digital identity verification. Cyber-attacks evolved dramatically. Consumer demand for greater online protection against identity theft and other cybercrime increased. And private and public sector organizations worldwide significantly accelerated identity verification programs aimed at increasing trust online and enabling consumers to prove that they are who they say they are securely but with ease.
2023 will see digital identity verification advance at an even faster pace, driven by innovation and regulation in finance, government, travel and numerous other sectors.
Here are just a few of the things iProov sees on the horizon: biometric + device will overtake password + device; record-breaking synthetic identity fraud; biometric “liveness” checks will be mandatory starting in the EU; privacy-enhancing government-backed digital identity will grow and be interoperable; “deepfake” digital attacks will take hold; the meta-verse will become an identity crime channel; expect big growth in device spoofing; more government regulation to protect infrastructure; and the importance of verifying identity as a defense. ~ Daniel Molina, Vice President Latin America, iProov
2023 payment industry perspectives ahead
“Inflation is like toothpaste. Once it’s out, you can hardly get it back in again.”
~ Former West German central banker Karl Pohl
Inflation will remain a reality in 2023, with or without help from central banks worldwide. The payments industry will feel the impact as consumer spending tightens and central bankers try to get the toothpaste back into the tube again. We’ve seen these economic cycles before. The economy will get its feet back under it, but we may have another 24 months of choppy water ahead.
I’m optimistic based on how fast the industry responded during the pandemic. What I take away from the predictions of our payment industry leaders is that we’ll get through these challenges with a focus on innovation, efficiency, fresh thinking, and determination.
Look for Part 2 in our 2023 payment industry leader predictions coming next week.
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