Members Only | 09/02/22

The payments and financial services sector has changed radically, with shifting consumer and business preferences accelerated by the Covid-19 pandemic. As we move into 2022, I expect to see further innovation and growth, in line with the huge digital shift and prioritisation of personalised consumer experiences that we have seen in 2021. While there is still uncertainty, the payments sector must leverage collective transformation efforts to align with the changing needs of the future customer.

Over 2.5 million UK consumers and businesses now use open banking-enabled products, a number expected to grow in 2022. Open banking enables third-party financial service providers to access consumer data from external financial institutions, allowing consumers to seamlessly manage their finances and have more choice over banking services.

In response, there has been a boom in new fintech platforms championing innovation and economic growth. SMEs can benefit from this development, connecting directly to financial institutions via APIs, making it easier to accept payments and focus on business growth. As the demand for accessible financial services continues to rise, I predict that over 30 million UK consumers and four million businesses will use open banking by the end of 2022.

This year we have seen B2C Buy-Now Pay-Later (BNPL) platforms, such as Klarna and Zilch, grow in popularity. Now providers are looking to expand into the B2B market, solving the issue of a lack of funds for buyers and the sellers by creating a credit line for B2B buyers. When it comes to B2B BNPL, companies that make purchases do so with the intention of positively impacting revenue and growth, reducing the risk of defaulted payments. B2B BNPL allows businesses to make purchases on margin, while the BNPL provider pays the seller in full, taking on the customers’ default risk. I foresee a possible evolution of B2B BNPL models to take advantage of the huge benefits of creating efficiencies within the accounts payable and receivable cycle. B2B BNPL will alleviate the time taken for purchase order and invoice processing, creating efficacy within payments.

The future of B2B BNPL innovation will rely on data. Through adopting machine learning, BNPL providers can assess the chances of recovering any overpayments, allowing them to predict problematic businesses. These benefits of data analysis are not just limited to BNPL. According to IDC’s Digitisation of the World study, by 2025, every person in the world will produce a data interaction every eighteen seconds on average.

By analysing customers’ data, businesses can identify the consumption habits of existing customers, enabling the personalisation of experiences. Embedded AI tools will be key in achieving this, as their capabilities allow businesses to analyse an incredible amount of customer data quickly. So far, fintechs have been using these technologies for automation and fraud detection but increasingly will help businesses access and understand their data, creating added value.

It is difficult to predict how far innovation within the payments sector will go in the next five years. The role of payments is now more than a simple exchange of value for goods and services – the payments sector must evolve to accommodate increasingly digital consumer bases. The pandemic created a once-in-a-lifetime opportunity for the industry to take charge of financial services. It’s the industry that must embrace that opportunity to benefit everyone in the value chain.