Consumers and merchants, not banks, are driving change within payments. Even before the pandemic, payment firms were being forced to replace transaction processing with value-added and embedded experiences. One example is the introduction of Payment Initiation Service Providers (PISPs) in the EU.

Consumers want convenient, lifestyle-embedded payments and seamless cross-border transactions. Merchants want instant confirmation of payment, smooth reconciliation against orders, and seamless cross-border transactions.

Gen Z consumers are switching from credit cards to Buy Now Pay Later (BNPL) which is a form of digital credit. Merchants report seeing an increase in conversion rates, average orders and repeat business by adopting BNPL. If consumers are not using credit cards to repay BNPL transactions there is an opportunity for new innovations such as direct payments from their bank account using a Payment Initiation Services (PIS) type service.

Digital adoption is growing everywhere and driving requirements for simpler, faster and more secure payments and provides the opportunity to include the unbanked and under-banked into the financial system.

Social media and telecoms giants are seeing opportunities to make money from their millions of users by providing payment services. This new type of competitor to traditional banks and Fintechs is discussed further in the Fintech Revolution module.