Payment innovation is gathering steam in 2023

Payments modernization is a hot spot within the fintech universe, with the pace of change accelerating in recent years due to more powerful technology, robust payment standards and the pandemic.

And it’s shifted the entire payments ecosystem, says Nigel Prince, senior vice president, partnerships, ventures and delivery at the $704 million-asset Axiom Bank in Maitland, Florida, adding that businesses expect financial institutions to offer more innovations, including real-time payments and requests for payment.

“The ability to anticipate demand, manage reserves and provide timely settlement of amounts owed is more important than ever in this age of increasing demand, supply chain challenges and evolving consumer sentiment,” Prince says.

In 2023, more small and mid-sized businesses will want financial institutions to offer a broader suite of digital financial management workflows and integrated payment solutions that can help them overcome challenges within their accounts payable and accounts receivable processes, says Keith Riddle, CEO of BankiFi Americas. His company was a finalist in BAI’s 2022 Global Innovation Awards.

And there are challenges: 62% of SMB owners are concerned about cash-flow issues resulting from difficulties in collecting payments from customers and then paying their suppliers. A third of SMBs have more than $20,000 in outstanding invoices because they don’t have a timely way to collect those payments, and nearly a third cannot pay vendors on time.

“These challenges can be solved if financial institutions offer an embedded banking platform with a set of integrated services—accounting, invoicing, payments and cash flow forecasting—to their SMB customers via an open platform, facilitating accounts receivable and accounts payable transactions, as well as impactful financial insights,” says Riddle, who is based in Columbus, Ohio.

In the view of Richard Crone, CEO of Crone Consulting LLC in San Carlos, California, the most important payments phenomenon to track in 2023 is the entrance into the U.S. market of Temu, Shanghai-based Pinduoduo’s online shopping site. Temu facilitates “team purchases” that allow micro-influencers, family members and friends recruit others to earn quantity discounts on their combined purchases.

“Temu’s unique invention is leveraging word of mouth, social sharing and ‘check-in’ before extending an offer versus just acknowledging a purchase afterwards on one’s social feed such as Venmo, Facebook, Instagram, Twitter or TikTok, or buyer reviews on Amazon and the like,” says Crone, adding that financial institutions whose retail customers use a platform like Temu can bolt on other services to expand their revenue.

Other payments innovations that Crone is watching in 2023 include the modernization of “pay by bank” by retailers; acceptance of peer-to-peer payments by merchants at point of sale; and the launch of more all-in-one accounts that combine debit, prepaid, credit, BNPL and savings in a single mobile user interface.

Cloud-native solutions are enabling new entrants to differentiate in banking segments once thought too expensive to enter, says Sean Viergutz, banking transformation leader at PwC in Chicago. Companies that have already established API-enabled platforms are changing the game by simplifying working capital management for corporate treasurers, and reducing the cost and complexity of traditional B2B and cross-border products.

Zachary Aron, principal and U.S. payments leader at Deloitte Consulting LLP in Albuquerque, New Mexico, says the industry is at a tipping point for payments in the areas of digital identity, payments infrastructure and digital currencies.

“Right now, we are seeing capabilities being developed and embedded into digital experiences, and we expect to see trials where digital identity and security help enable a variety of payments transactions,” Aron says. “We also expect to see innovation in cross-border interoperability between networks, enabling faster money movement and making it easier and more seamless for both people and businesses to make purchases when and how they want.”

Financial institutions will develop “truly” personalized products and services to better serve their customers, he says. These will include “just-in-time” delivery of payment, lending and insurance products that match the type of transaction that is being conducted, as well as delivering specific insights on how people or businesses use their money.

“Personalization is becoming even more important than ever,” Aron says. “The No. 1 thing consumers and businesses are saying is, ‘Know me.’”

Katie Kuehner-Hebert is a BAI contributing writer.

Explore what’s new in the payments space and where the sector is heading in the BAI Executive Report, “Banks are getting more personal with payments”