Storms are in the offing, and the payments market in 2023 will either sink or swim. The global economic headwinds will also slow the growth of the APAC payments market. Almost everyone in the payment value chain must rethink their playbooks. Payment fintechs will change leadership and focus on the bottom line. Consumers will have bigger targets on their backs for fraudsters. Forrester expects that:
- One in four payment fintechs will fold because they didn’t follow the 2008 playbook. With VC money drying up across the globe and a likely drop in transaction volumes, payment firms will focus on cutting overhead and improving go-to-market efficiencies. Those without moats are vulnerable to takeover by large banks and payment giants who want to increase volume; those with unique IP will have to defend their talent, causing wage inflation to spike as the push-out of IPO paydays dims the appeal of stock options.
- Push-based payment fraud will see double-digit growth in 2023. Fraudsters will increasingly shift focus to the weakest link: consumers. As more consumers engage in push-based (i.e., consumer-initiated) payments, fraudsters will have more opportunities to target them with social engineering-based scams. Singapore saw online scams surge by 163% after COVID-19. China’s recently issued Law Against Telecom and Online Fraud aims to prevent scam-related losses. Many payment firms are insufficiently prepared for push-based payment fraud because they lack advanced authentication approaches and have not educated customers in self-protection.
On the flip side, even under pressure from the economic downturn, we will still find the strong resilience in APAC’s payments market supported by payment players’ more practical innovation focus and the region’s alternative modern payment networks that increase efficiency for cross-border commerce.
- Payment innovation teams will clash, and the “boring” will beat out the “bedazzled.” Ninety percent of the innovation investment in payments will have to offer a clear-cut return in order to be spent. Money destined for envelope-pushing payments experiences, like in the metaverse or other blockchain projects, will get repurposed to baseline payments infrastructure and modernization projects. The highly competitive world of consumer payments will draw less investment and fewer innovations while B2B payments modernization will become the low-hanging fruit.
- Regional payment networks will boost cross-border commerce. A large number of APAC-originated modern, cross-border payment networks are poised to replace the 50-year-old SWIFT system still in use as the region’s payment infrastructure. These include the QR code-based system and multi-CBDC pilots across Southeast Asia, the CIPS system in China, and the UPI system in India. These networks use modern technology (including blockchain) and APIs to ensure interoperability. Banks and payment firms need to increase investments in developing API-based and modularized solutions that can seamlessly integrate with the regional new payment networks.
Explore the 2023 Predictions hub to see where strategies are shifting – and where opportunities for bold moves exist.
This post was written by Senior Analyst Meng Liu and it originally appeared here.