Open banking, alternative payment solutions, M-commerce, and BNPL are just a few trends in the FinTech world and in the payment industry that are on the horizon for the upcoming year.
However, things have changed since the pandemic hit the world and the financial industry had to find ways to adapt to a new reality and fit into the technological society of the future. Cutting-edge technology is enabling FinTechs to meet the market’s demand and transform the way we deal with our finances. That said, we’ve wrapped up the hottest trends to watch for in 2022.
Cross Border E-commerce
E-commerce had its big moment during 2021. Despite the pandemic scenario, Brazil remained the largest e-commerce market in Latin America, registering a growth of 38% in the same year.
The segments that made the most out of it were imported goods, with a 92% increase, the pet industry, registering 88% of growth, followed by housing and furniture with a rise of 87%, just to mention the top three. The good news is that it won’t stop here. Worldpay from FIS have estimated that e-commerce in Brazil is set to increase 56% by 2024.
In general, the Brazilian consumer migrated from buying in brick-and-mortar shops to digital stores and felt more confident to do so. As confidence increases among shoppers, Brazilian e-commerce gains momentum and opens up the opportunity for international merchants to penetrate the Brazilian market.
The LatAm market, especially in Brazil, can be tricky and frequently complex to penetrate if the merchant doesn’t know the market. Brazilian shoppers often use traditional payment methods – such as a credit card – and local payment systems – like the popular boleto bancário and the revolutionary Pix, only available for transactions in Brazil now.
The rise in cross-border e-commerce is primarily due to increased investment and trade. However, these transactions still present some challenges in terms of cost, time and efficiency. Nevertheless, given the challenges and the potential of the huge Brazilian market, offering a number of payment options to the final customer in a digital business can define how far a merchant can go and how much they can achieve.
More than that, partnering up with the right players will streamline the process of entering this market – oftentimes it’s necessary to register the company locally, along with a series of documents and bureaucratic processes.
PagBrasil cuts out the hassle for the international merchant, making their cross-border payments much easier, it broadens market reach and helps digital businesses to navigate the complexities of the Brazilian payment system.
Digital Payments and Mobile First
When it comes to the digital payments trend for the next year, one of the hottest trends to watch is M-commerce. M-commerce stands for mobile shopping. The percentage of smartphone owners who purchased online using their mobile in Brazil reached 90% in 2021, according to Statista.
M-commerce is set to double its share of retail by 2025 worldwide, so it’s indispensable for any digital businesses who intend to increase their conversion rates to keep their website as mobile-friendly as possible, providing a fluid checkout experience for the shopper, with many payment options to choose from.
For a better UX, the best option is to offer tools that make the checkout and the payment process as easy as possible. Hassle-free resources such as Boleto Flash® designed and optimized for mobiles with just a one tap copy-paste method in the banking app and instant payment confirmation are some of them. Other easy-to-use methods are Débito Flash™ and PagBrasil Pix.
Two bets in 2022 are contactless payments and payment links within the real-time payment landscape. These two technologies are king when it comes to quick and convenient payments.
Contactless payments are growing in popularity with digital wallets, which means that no-touch payment technology is increasingly popular in other contexts, gaining acceptance and credibility among online shoppers.
In a world where people won’t wait for you to get out your wallet, payment links simplify the payment process while optimizing the customer’s journey.
As the number of physical shops going digital increases, even the brick-and-mortar shops that don’t intend to create an e-commerce website can still take advantage of this type of payment. All they need is an online presence of some sort, such as a social media profile, so that they can connect directly with their customers.
Social media and instant message apps such as Whats App are popular in Brazil and relevant even for larger retailer.
The payment link also offers a number of benefits and can be used in remarketing strategies and even social actions. In addition, it allows merchants to expand their sales channels, as customers can make purchase on different platforms.
A Cashless Future
By 2023, some Nordic countries aim to go completely cashless and fully embrace digital payment methods. In the UK, predictions suggest that by 2026, the country will be almost completely cashless.
The tendency is to move away from traditional fiat currency into automated and quick payment methods – which include contactless payment using mobile phones, payment links, and subscription-based payment.
In Brazil, despite the high proportion of fiat money being used compared to other nations such as the US (12%) and China (13%), in 2020 only 35% of payers used cash to pay for a purchase – a 12% drop when compared to the previous year.
One of the reasons was the pandemic. In a study conducted by FIS, 47% of participants said they reduced their cash payments this year, while 52% revealed they used more digital payment methods in 2021.
Another payment trend that is spreading fast and becoming popular in the payment industry worldwide is the ‘Buy Now, Pay Later Model’ (BNPL) – especially among Gen Z and millennials. This payment option lets people spread out costs, often without interest fees. What seems to be a novelty in the payment industry worldwide is a very well-known option to Brazilians.
In Brazil, the traditional installment payment method is done with a credit card. In the future, the companies providing BNPL will allow customers with no credit card or bank account to choose this payment method using a type of loan provided by a third-party institution, which works as a middleman between the merchant and the consumer.
In terms of adherence, the Bank of America forecasted a 10 to 15 times growth until 2025 in the US. 37% of the British said they have already used the BNPL option in the UK, and 52% of BNPL users confirmed they’ve been using this payment method more often since the beginning of the pandemic.
The subscription economy is the transition from the traditional pay-per-product model to a subscription business model. Amy Konary is an expert within the SaaS recurrent space and the VP and Chair of the Subscribed Institute at Zuora, and she revealed that in today’s SaaS landscape, the subscription model is different from the old one:
“In the subscription economy, it’s not about the [packaging], it’s not about the CD, it’s not about the code, it’s actually about the people using the code and what they’re doing.”
In a nutshell, the focus is to provide the consumer with a personalized and unique experience – the cornerstone is to deliver value to the individual. In contrast, the old business model focuses mainly on the final product.
According to a survey published on Statista, nearly 60% of Brazilians spent money on digital video content via a subscription in 2021. But Brazilians don’t spend their money only on Netflix or Amazon Prime. The country’s subscription economy has grown far and wide and reached different niches, such as beverages (coffee and wine), gyms, food delivery, and pet shops.
PagBrasil’s PagStream® is a complete recurring payment platform for Brazil and offers benefits for both merchants and customers – from a wide range of payment options that go beyond the traditional credit card; we offer them the debit card, Boleto Flash®, PEC Flash®, and Pix; it also provides flexible subscription recurrence configuration for the buyer, quick and easy integration to the merchant’s platform and much more.
Open banking is a banking system which consists of the sharing of data, information, and services by financial institutions at the customer’s discretion. In other words, consumers will be able to share their personal data, as well as information regarding their transactions, to access a larger range of financial products and services that best fit their needs.
Open banking is considered a significant innovation that will impact the banking system and foster competition among banks. On December 15, open banking initiated its fourth phase in Brazil — the Central Bank has decided to implement the changes in a phased manner to maintain an adequate level of security.
Therefore, the initiative will allow banks and FinTech companies to deliver financial solutions that are customized to the consumer’s needs, in addition to a better payment experience in the digital environment.
According to the Central Bank, some of the main benefits that interest the e-commerce landscape are that it will offer a variety of payment transactions, transfer resources through social media, and favor the population’s financial inclusion and education.
Read more: Open Banking in Brazil: what will change?
The upcoming implementations, as per the Central Bank’s plan are:
- Insurance, open supplementary pension, and capitalization: from 15 December and 4 March 2022
- Accreditation services in payment arrangements: until 11 March 2022
- Exchange operations: until 18 March 2022
- Term deposit accounts and other products: until 25 March 2022.
PagBrasil is off to the races for the hottest trends in 2022, such as payment links, subscription-based payment methods, as well as hassle-free and the quickest payment methods on the market, such as Boleto Flash®, PagBrasil Pix and Débito Flash™. If you wish to increase your sales and take advantage of the latest market trends, get in touch with our sales team!