5 January 2023

Future forecast: What’s in store for retail, payments, and fintech?

In 2022 merchants saw an increased demand from consumers for advanced payment methods - all the while contending with ongoing and new regulations like SCA. The addition of broken supply chains, inflation and changing consumer behaviors also meant unprecedented challenges within retail, payments and fintech.

Flash forward to today, and merchants face a looming recession and ongoing shifts towards tokenization, cross-border payments and more, making payment orchestration platforms (POPs) that provide the necessary infrastructure to take on these hurdles critical to scale. 

Across the world, merchants are switching their business models and taking advantage of new opportunities as they try to transition from ‘survive’ to ‘thrive’. 

So, what trends can we expect to see across payments and retail for the year ahead?

1. Consumer shopping habits will shift with inflation in 2023

Inflation hits everywhere, which will be true for the year ahead. Retailers will feel a “squeeze” because continued high fuel costs and reduced oil capacity will make it more expensive to deliver goods. These high fuel costs will push retail sales down, making it crucial for retailers to incentivize consumers to shop and deliver savings back to the customer where they can. 

Consumers will also look for better, lower prices on goods, pushing them to online shopping and shopping around in 2023. As a result, expect to see more of an open market. Consumers will not go to only one online store or marketplace to shop anymore; instead, they’ll start thinking, “Can I get this cheaper somewhere else?” To capitalize on this, retailers that sell goods will need to optimize their checkout experience to support consumers better.

2. Loyalty schemes will become big for retailers

Already prominent in the UK, loyalty is suddenly becoming a big thing for retailers worldwide as they look to loyalty schemes as a way for consumers to save money and increase brand devotion. Customers who utilize things like brand-specific discount cards in stores will get something cheaper than those who do not. 

Secondly, retailers will start to offer additional savings schemes. If a consumer makes a monthly payment into a prepaid system, agrees to shop at the retailer, and then goes to that store and makes a purchase, they’ll get a discount for prepaying and showing brand loyalty. 

Loyalty is becoming part of payments, and this will become an even more significant trend in 2023 as people begin to think about how to get through the hard times ahead due to growing costs and inflation. From a retailer perspective, it’s time all retailers start looking at how they can help consumers and turn loyalty into an advantage.

3. BOPIS (Buy Online Pick Up in Store) will continue as a popular retail strategy

Buy Online Pick Up in Store (BOPIS) was a big trend before COVID-19 due to security concerns as consumers had boxes stolen off their front steps. During COVID-19, with everyone home and able to collect packages, this trend tapered off. 

In 2023, BOPIS will gain momentum again because rising fuel prices will increase delivery costs, driving retailers to offer discounts if customers pick up items in-store. As an offshoot to this, a little trend will happen where retailers even provide cheaper delivery costs for online items that customers agree to have delivered to a store nearby instead of to their homes. 

4. Consumers will choose alternative payment methods over traditional cards

Most people are already starting to move away from traditional credit card payments. Announced interest rate hikes in late 2022 by the Federal Reserve and growing inflation and consumer debt will make alternative payment methods even more attractive to consumers in the year ahead. While there are many factors, if done right, expect real-time and instant payments to continue to gain prominence, and Buy Now Pay Later will not be going anywhere either.  

5. Bank-to-bank payments and brand loyalty will accelerate in 2023

Bank-to-Bank payments are a cheaper payment method for the merchant, but no current incentive exists for the consumer to use it. Merchants pay a much lower percentage rate with customers who use this and other alternative payment methods as opposed to credit cards. 

With Open Banking already big in the UK and growing in the US, merchants should ask how they can use this discount to benefit consumers, drive preference and deliver cost savings back to the consumer in order to incentivize them to use these cheaper methods.   

6. Tokenization and data regulation will take center stage in the year ahead

Tokenization is big and will continue to be top of mind for merchants in 2023. With data security and regulations in place - and more on the way - many merchants are asking - and will continue to ask - how tokenization will change what they do. 

As a result, expect to see the further rise of tokenization and merchants start to think about it and how they can use it to their advantage rather than as a mandate. As a solution, they’ll need to turn more towards payment orchestration platforms to help with tokenization and increase payment data security. If they don’t, then they’ll have to turn to a PSP and lock themselves into a long-term relationship.

7. Migration to cloud-native solutions will continue

Migration to the cloud is still happening and fast. A 2022 Foundry report showed that 69% of companies had advanced cloud migration over the past year. And merchants listed it as the number one thing they needed to do. 

The cloud is changing everything everywhere regarding hosting. Big central infrastructures and large mainframe servers are no longer necessary to run things. As a result, payments are moving to the cloud, and merchants who don’t make this move will be left behind. 

Merchants can’t lack the adoption of cloud-native payments infrastructure to serve customers’ payment needs. In 2023, they’ll need to look at the advantages of cloud computing and cloud-native POPs to achieve success.

 

8. Financial inclusion isn’t going away in 2023

Greater financial inclusion is always a concern for those within fintech and payments. Only some have a credit card, and with many Americans already at their credit limit, greater financial inclusion in the year ahead means merchants will need to evaluate their payment strategies and offer alternative payment methods. 

People still have to eat and buy necessities. Merchants who only offer credit card payments exclude potential customers and reduce financial inclusion by limiting their customers to those with credit limits. As a solution, merchants should consider their cross-border payments strategy and offer alternative payment methods like real-time payments, debit card processing or other payment options. That way, customers who can’t afford to shop at a store due to their credit limit can continue to get the items they need.

Gr4vy’s award-winning platform is the only cloud native, serverless infrastructure (IaaS) with the resilience, redundancy and performance you expect from a cloud company. Gr4vy’s infrastructure gives merchants the ability to expand and control their payment stack from anywhere through a single Universal API. The platform’s single-tenant cloud infrastructure also reduces points of failure to ensure that a merchant never loses a transaction, and can also spin up an Edge to any instance and deploy it where needed, regardless of location, to help merchants meet regional data privacy and protection regulations.

 

For an overview of Gr4vy’s platform, watch this short video, or explore the platform features and get in touch with a member of our team to learn more.