In the blink of an eye, we find ourselves nearing the mid-year mark of 2023, and what a whirlwind it has been. The payments game has shifted radically since the pandemic. In its wake, we ushered in a digital-first era that leaves cash trailing behind. Alternative payment methods like mobile wallets and Buy Now, Pay Later (BNPL) are also taking centre stage, presenting opportunities for businesses to attract a new generation of tech-savvy customers.

But that's just the beginning. Today, volatility and uncertainty have become our unexpected companions, and staying on top of the latest movements in payments has become more crucial than ever for businesses to stay relevant.

To help you navigate the space, we spoke to industry experts to get their insights on crucial payment trends to watch for the second half of 2023 and beyond.

In this article, we’ll be covering the following:

• Advancements in real-time payments
• Mobile wallets entering a new era
• The emergence of new business models with the growth of BNPL
• Digital banks driving innovation for customer experience
• Cryptocurrencies as a new payment method
• The global development of CBDCs
• Fragmentation and consolidation in the global payments landscape
• The future of transnational e-commerce transactions

Advances in real-time payments technology

Whether it's peer-to-peer or B2B, when you transfer money to another bank account, you expect it to be reflected immediately. This is where real-time payments (RTP) come into play, allowing payments that are initiated to be settled nearly instantaneously. This increases transparency and bolsters confidence in consumers. In fact, RTP adoption will continue to increase, and we can expect to see further innovations that boost its technology.

According to a recent IDC report commissioned by 2C2P, RTPs transaction values in Southeast Asia will surpass $12.9 trillion by 2026, an 8x increase compared to 2021. Thailand, Singapore, Philippines, and Malaysia have launched RTPs for consumers, with Vietnam and Indonesia planning to do so in the future.

Greater consolidation in the RTP space

There are currently many players in the RTP space today, leading to some confusion among consumers. Piyawit Manpanpanich, Deputy Director of Product at 2C2P, believes that we can expect greater consolidation in the RTP space. For instance, regulatory policies from central banks will significantly impact the industry by encouraging faster and greater adoption of RTP. Currently, regulators in Southeast Asia are attempting to link the various RTP schemes in the region. This will ultimately allow for cross-border RTPs for commercial purposes, possibly reducing volatile multi-currency conversion fees for businesses.

Potential integration of advanced technology and RTP

Piyawit also explores the potential integration of RTP with Virtual Reality (VR) technology, which can enable a more immersive form of e-commerce or in-store experience. Imagine shopping in a virtual mall and making payments by blinking your eyes. That said, VR technology is still at an early stage, and it will take more developments to achieve such a possibility.

Meanwhile, fraud is one of consumers’ and businesses' top concerns, especially when payments are frictionless. Artificial Intelligence (AI) technology will play an important role in bolstering fraud detection by leveraging large data sets and machine learning (ML). 5G technology will also improve network latency and time-to-content, which enhance the overall user experience when consumers make RTP payments.

Mobile wallets are entering a new era

The total number of digital wallet users is expected to exceed 5.2 billion globally in 2026, up from 3.4 billion in 2022. In Asia, China has spearheaded this trend; Alipay and WeChat now provide many payment services such as bill payments, remittances, and lifestyle services like ride-hailing and food delivery. Moreover, mobile wallets used to be limited to local usage. Today, with the rise of new infrastructures and technologies, consumers can use their local mobile wallets or other local digital payment methods across borders.

Cross-border digital payments are set to become the new norm

According to Ms Cong ShanShan, Head of Alipay+ Acquiring Partners at Ant Group, the revival of key economic sectors, including trade and tourism, is an inevitable trend we’ll see in 2023 following the ease of global travel restrictions, which has led to revenge travel and tourism revival. Ant Group is the parent company of Alipay, one of the world’s largest payment platforms serving over 1 billion users and 80 million merchants.

Travellers today are bringing along new consumer habits that they’ve gained in the past few years, which will result in digital payments, especially cross-border digital payments, becoming the new normal across the globe.

An example of how this is playing out is the increase in adoption of Alipay+ worldwide. Alipay+ is a suite of cross-border digital payment, marketing, and merchant digitalisation solutions, which connects global brands with mobile-savvy consumers worldwide. In 2022, Ant Group announced that Alipay+ reached over 2.5 million merchants – more than double their merchant coverage in just six months. This spans 1,000 online platforms, 10 international airports, 90,000 convenience stores, 360,000 restaurants, 200,000 taxis, and also hotels, shopping, and tourist outlets in Asia and Europe.

Through integration with Alipay+, merchants are able to process a wide range of digital payment methods and reach over 1 billion consumers globally. This integration connects them to various e-wallets, banking apps, BNPLs, nationwide or region-wide QR codes, acquirers, and other payment providers. With a sizeable number of merchants adopting Alipay+, consumers can now make payments using their home payment apps abroad whenever they see the Alipay+ logo at checkout, enabling a hassle-free travel experience for all.

To paint a better picture, consumers from Malaysia, Thailand, the Philippines, South Korea, Mainland China and Hong Kong SAR can travel around and shop at over one million merchants in Japan, a popular travel destination, using their local mobile wallets. For instance, statistics show that the volume of payments made by Korean visitors using Kakao Pay in Japan jumped eightfold, while the use of the Touch ‘n Go eWallet by Malaysian consumers increased sevenfold since the country lifted the daily cap on inbound arrivals in October 2022. Over the recent cherry blossom season, transactions made via Alipay+ recorded a strong usage increase in Japan. In addition, the total spending by outbound travellers to Japan more than quadrupled in March compared to October.

Personalise and diversify services to stand out

Another trend that we can expect to see in 2023 is mobile wallet participants tailoring their services to meet users’ evolving needs and gain an edge against their competitors. Often, this means leveraging analytics to compile more detailed user profiles and offering a more comprehensive range of services to make usage stick.

One example of this is GCash, one of the biggest players in the Philippine mobile wallet space. According to Ferdie Perez, Head of Commercial Product at GCash, expanding the range of everyday use cases for GCash has been a driving factor behind user adoption.

In 2018, GCash partnered with CIMB Bank to launch GSave, a feature allowing its users to open a savings account from within the GCash app. In 2019, they launched GInvest, which allows its users to invest in funds and listed unit investment trust funds (UITFs). Access to these features, as well as any usage limits, are determined using GScore, a system that scores users based on their transactions and payment behaviour within the GCash ecosystem.

Today, this score also enables GCash to offer fair and accessible lending products (from BNPL to quick credit offerings) that expand users’ payment options and further encourage the uptake of cashless payments through the platform.

Digital banks are elevating customer experience through innovation

Digital banks have been gaining popularity worldwide due to their convenience, low fees, and user-friendly interfaces. The rise of digital banks creates competition within the industry and drives innovation that unlocks new customer experiences.

According to Michal Bialer, Chief Product Officer at Trust Bank, Singapore’s first digitally-native bank, digital banks differentiate themselves from traditional banks in two ways: by offering lower costs and a customer-first experience.

Digital banks are built from scratch in the cloud and do not have expensive legacy technology or branch networks to maintain. As a result, cost savings are passed down to customers through lower fees.

User experience is another key differentiator. Case in point: Trust Bank’s innovative customer referral programme used modern cloud-native technology to create a real-time user experience. For instance, users are notified in real-time via the Trust App at every step, from when referees sign up to when they receive their rewards. Furthermore, being cloud-native, digital banks have the agility to respond quickly to customer feedback. For example, when customers requested a way to adjust their credit limit on their own, Trust Bank provided that option within two weeks. Overall, digital banks are raising market standards by providing a truly customer-centric experience.

Solving customer pain points must remain at the heart of innovation

Michal shares that Trust Bank innovates by building new products and features or creating improved digital versions of existing offerings that enhance customer experience. For example, their new personal finance management (PFM) tool takes the form of a cast of animated cartoon characters that grow depending on how users spend, delivering useful insights to them in a relatable way. This feature takes a different approach from other banks’ personal finance analytics features, which tend to focus on detailed charts but often fail to deliver on the fun factor.

The emergence of new business models with the growth of BNPL

The growing popularity of Buy Now, Pay Later (BNPL) is one of the biggest alternative payment trends we saw last year. BNPL allows you to split a payment into bite-sized, interest-free instalments that you can repay over three to four months without owning a credit card, hence increasing payment flexibility for consumers with limited financing options. For businesses, BNPL helps to generate new customers, create customer loyalty and drive higher conversion and basket size. For example, with ShopBack PayLater, businesses can leverage a more cost-effective and data-rich way to grow their sales.

Arvin Singh, co-founder and CEO of hoolah, Asia’s leading BNPL company acquired by ShopBack, shares that we’re likely to see an emergence of new business models which combine the flexibility of BNPL with additional services to enhance the overall user experience. For instance, with ShopBack PayLater, consumers can be rewarded in the form of cashback, which can then be used to offset subsequent purchases. These added benefits help set them apart from competitors and drive repeat usage amongst customers.

In addition, as more players enter the BNPL space, we can expect to see new and creative use cases in which BNPL will be applied. For example, with the return of travel, consumers can choose to pay via BNPL to offset travel-related expenses such as flight or hotel bookings which have seen a surge in pricing. For consumers, this means having greater opportunities to choose to buy now and pay later across multiple product lines and services.

Cryptocurrencies as an alternative payment method

“An exciting year lies ahead of us for the crypto space,” shares Eric Barbier, CEO of Triple-A, a crypto payment gateway enabling crypto payments and payouts. With over 420 million users, crypto is a potential avenue that businesses may wish to tap into to gain an additional revenue stream.

Greater security and resilience in the crypto space

Amidst recent events, some of the biggest concerns in the crypto industry are security and price volatility. To address these, governments are introducing stricter regulatory frameworks and policies. For instance, the Singapore government’s robust regulatory framework prioritises anti-money laundering and consumer asset protection. While some view regulation as a negative force, Eric believes such frameworks provide a stronger sense of stability and legitimacy for the crypto industry and promote the adoption of cryptocurrencies and blockchain technology. We can also expect greater innovation in security mechanisms for crypto wallets that protect against hacking attempts and theft.

Companies like Triple-A protect businesses and partners from the price volatility risk of crypto. With real-time fiat-to-crypto or crypto-to-fiat conversions, they enable businesses to pay and get paid in cryptocurrencies without managing cryptocurrencies on their balance sheets. Businesses looking to diversify their customer base or keen to offer something new and innovative could experiment without overt risks.

The global development of CBDCs

Central Bank Digital Currencies (CBDCs) are gaining traction in countries worldwide. CBDC is a digital currency issued by a central bank, an alternative to physical currencies and cryptocurrencies. According to the American think tank Atlantic Council, 114 countries, representing over 95% of global GDP, are exploring a CBDC. Eleven countries have already launched a CBDC, such as the Bahamas, Jamaica, and Nigeria, and 18 countries are in the pilot stage. Some of the most commonly cited motivations for exploring a CBDC are boosting financial inclusion, improving innovation, and increasing the efficiency of payments.

The rise of CBDCs could enable central banks to directly facilitate financial services for the unbanked and underbanked. CBDCs could enable accounts to be directly held on the central bank's ledger, with account holders accessing and transacting with their balances via digital wallet apps linked to the central bank account via APIs.

Furthermore, CBDCs enable a new era of programmatic money, paving the way for smarter, more efficient financial systems. Wutthisart Yingdon, Director of Application Development at 2C2P, notes the potential of the programmability of CBDCs, which could enable payments on condition of specific criteria or events. For example, funds could be released only when certain conditions are met, such as the completion of a service or the delivery of goods.

He also believes that with programmatic money, CBDCs could foster innovation by allowing developers to build decentralised applications and financial services on top of the programmable infrastructure.

CBDCs also hold the potential to enhance interoperability between different financial systems and networks. For instance, CBDCs could facilitate the connection of banks, fintech companies, and payment service providers, enabling smooth transfers of funds. Interoperability could also allow CBDCs to seamlessly integrate with existing financial infrastructures, such as payment systems, clearinghouses, or settlement networks. This integration would enhance the efficiency of transactions, making the movement of funds more seamless and secure.

Overall, there is much to explore with CBDCs in terms of how they can elevate the efficiency and security of the financial system. That said, whether CBDCs could become mainstream would be a matter of technology readiness, infrastructure, and public acceptance.

Fragmentation and consolidation in the global payments landscape

Payment methods are evolving rapidly – but is the global payments landscape becoming more fragmented or consolidated?

2C2P’s founder and CEO, Aung Kyaw Moe, traces back to the last 10 to 15 years when geopolitical interests led larger nations to come up with their own payments network – Japan built JCB, India built RuPay, and China built UnionPay. With their own payment infrastructure, nations can influence the macroeconomic cost of doing business in their country.

Initially, central banks implemented domestic payment switches to facilitate interbank ATM interoperability and other financial settlements such as point-of-sale (POS) transactions and fund transfers. As these systems evolved, they began incorporating newer technologies such as Quick Response (QR) code payments, as well as payments linked to a resident’s ID or mobile number. As local payment infrastructure matures and begins to extend across borders with cross-border real-time payment linkages, this could result in international card schemes and payment providers facing increasing competition.

Aside from geopolitical interests, the pandemic has also accelerated countries’ digital payments growth, with countries fast-tracking their national switch agenda and developing independent infrastructure, payment networks, and card schemes.

Increasing consolidation in global payments standards

While Aung notes the diverse and localised payments landscape, he adds that we will see increasing consolidation across the industry and world. Consider how different mobile operators use different technology providers to offer mobile network services to the consumer. Yet, the standard is that we can call one another seamlessly and globally today. This is made possible by the industry standards established by organisations such as the GSMA that unifies mobile operators worldwide. Similarly, common payment standards will emerge as technology evolves.

Currently, international organisations like EMVCo are setting industry standards such as the EMVCo QR Code Specifications that are available to every nation. Many countries are adopting that standard, and we’re seeing innovations like SGQR and PromptPay QR, and even cross-border linkages between such initiatives.

The future of transnational e-commerce transactions

With digitalisation and new payment methods like mobile wallets taking off, the global e-commerce market is set to hit new heights. It was predicted that 20.8% of global sales would be online this year, compared to 17.8% in 2021. The Indian e-commerce market is one of the fastest growing in the world, while China is leading in the global e-commerce market. A slew of new e-commerce trends have been accelerating, such as social selling and Direct to Consumer (D2C) e-commerce, eliminating the need for brick-and-mortar stores. Therefore, businesses need to have an omnichannel presence to compete. This entails providing customers with a seamless shopping experience across all channels, including in-store, mobile, and online.

Payments have become a crucial consideration for businesses looking to expand. For instance, businesses need to offer payment methods that local customers prefer to provide a seamless checkout experience. By doing so, businesses can effectively translate the checkout process into increased sales, leading to improved conversion rates and a reduction in shopping cart abandonment rates. The fragmentation of payment infrastructures globally can vary greatly from country to country. Cross-border payments can also be expensive, with volatile currency exchange fees.

Government-led cross-border initiatives and mandates could play a significant role in reducing fees and regulating payments. Businesses could also tap on payment service providers with built-in payment infrastructures to accept payments worldwide.

About 2C2P

2C2P is a full-suite payments platform helping businesses securely accept payments across online, mobile and offline channels and providing issuing, payout, remittance and digital goods services.

With over 250 payment options ranging from credit cards to mobile wallets and an alternative payments network of more than 400,000 physical locations, 2C2P is the preferred payments platform of tech giants, airlines, online marketplaces, retailers and other global enterprises.

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