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The biggest changes in the industry of payments in 2022 — and the impact of the pandemic on the digitalization of the payment landscape

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Meaghan Yuen|January 11, 2022

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  • The demand for digital hasn’t stopped, as the share of cash and checks in food service and in-store retail transaction value is expected to drop to 18.5 percentage this year.
  • The use of debit cards will continue as the most frequent method of payment in the US However, it faces the competition of credit and prepaid cards , with increasing borrowing.
  • Are you employed within or in Financial Services sector? Get insights into business on the latest technological advancements as well as market trends and your competition using the power of data.

The pandemic is accelerating the digitization of the payments industry in 2022, which will be an important turning point in how consumers and businesses re-inforce the ways they shop. Based on Our monthly Payments Ecosystem report, we analyze and describe the payment industry, and analyze major trends that impact both businesses and consumers.

The industry of payment processing overview

Digitalization has accelerated in peer-to-peer (P2P) as well as business-to-consumer (B2C) and business-to business (B2B) transactions starting in 2020, however the second season of this pandemic has made it clear that the trend is staying put even as spending levels begin to normalize. The stakeholder groups that pay fees to complete these payments, such as processors and acquirers network operators, issuers, and issuers are trying to keep up with shifts in how individuals and businesses transact.

Analog payment rates plummeted after the outbreak and will continue to slow down through the year as credit and prepaid card duel for the majority of their use. In actuality, cash and checks’ share of transactions in food and retail value is set to drop to 18.5 percent in the coming year and then decline further into 2023, as per our predictions.

As a result of the rapid growth in digitalization, merchants must make sure that customers are able to use the payment option they prefer. This will, in turn, be placing pressure on point-of sale (POS) service providers to design multichannel solutions that can meet both requirements for both the front and back end. All across the industry of payments, vendors are racing to discover new payment channels, reach new segments of business and consumer customers and take on new technologies for transaction and devices.

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Industry trends in payments

In-store payment methods

In-store sales will continue to be the most popular channel for retail sales in dollars and share as shoppers’ habits change. In 2022, the in-store sales’ share of retail sales will decrease because customers will shift their focus to online shopping.

Card payments dominate in-store retail. In 2021 in the very first time in the last 16 years, US debit card purchases will surpass credit as people sought to minimize risk to their finances during the pandemic that is supposed to stabilize the year. According to our forecasts debit purchases will comprise more than 40% of all in-store food and retail dollars. Contactless transactions are creating new and unique methods, like proximity-based payments like Apple Pay, in-store buy now buy in the future ( BNPL) as well as Click and Collect.

Growth in E-commerce

US retail e-commerce sales will surpass 1 trillion dollars for the very first time this year, but the growth will be unevenly distributed across different channels Desktop sales will slow until 2025, whereas mobile transactions are on the rise with 4 percent of 10 dollars in retail e-commerce in the very first time in the past year. The reason checkout providers are working to improve the mobile payment experience as well as evaluating possibilities for growth in online commerce.

The growing need for brick-and-mortar retailers to go online has made gateways more prominent in the ecosystem of payments. Some of the most prominent players in the business are in the process of acquiring and partnering with gateways to bring together software for in-person as well as online channels.

Digital payment

The digitalization of payments isn’t limited to retail stores there are real time mobile payments via P2P, digital remittances and business payments growing as technology advances across the system.

In 2025, more than 7 out of 10 users of smartphones will become mobile payment users, and the possibility to join two under-utilized audiences Gen Zers who are gaining spending power, and security-conscious consumers who have stayed away from digital payment because of safety fears.

Digital remittances are projected to increase by 45percent between 2021-2025, reaching $428 billion according to a study by Juniper Research. The growth of new players like Remitly and Wise (formerly TransferWise) is an indication of a shifting market that is pushing incumbents to cut costs.

After a drop in the year 2020, US B2B payments are predicted to be in for an additional year of growth by 2022 with the forecast for volume to be $28.611 trillion. To make the most of this opportunity the payment service providers will intensify their efforts in B2B and will target primarily small companies–which account for a large portion part of US B2B market, in seeking affordable, accessible solutions.

Credit card

In the beginning of the epidemic, the credit card spending fell because of overall spending decreases and uncertainties in the financial market. Credit card use increased in the third quarter of 2021. growth that is expected to be stable by 2022 as purchases that are not essential, such as entertainment and travel, returns.

The first time during the year the consumers are embracing e-commerce with a fervent enthusiasm that will see online credit card use to $500 billion. But the percentage of payment methods of transactions made through digital retailers and card transactions is expected to decrease in part due to the people’s increasing preference towards debit. The issue is being addressed to counter this by releasing new cards that offer incentives and value propositions, including lower charges in addition to payment flexibility as well as financial tools.

The industry of payments explained

For the first time, Insider Intelligence’s annual Payments Ecosystem–a broad-based report catered toward the entire payments industry–will be broken out into four parts, allowing for more detailed-yet-digestible content that more specifically addresses the areas that matter to you:

  • Participants in the Payments Purchasing Chain: How Key Players Facilitate Transactions–and How Their Roles Are Changing
  • The Point-of-Sale: How Hardware and Software Providers Are Meeting Merchant Demands for Omnichannel, Full-Suite Products
  • Payment Methods and Funding Mechanisms: What Shifting Consumer and Business Payment Preferences and Habits Mean for the Industry
  • Payment Flows and Transaction Types:How Lasting Digitization Is Reshaping Providers Growth, Revenue, and Competitive Strategies

Each chapter will look at the changing dynamics of markets and the impact it has on the stakeholders. We will also determine the top trends for 2022 as guided by our detailed forecasts and exclusive third-party information.

Go here find out more about getting access Financial Services content like the Payments Ecosystem 2022 report.

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