Credit card processing is changing right along with the technology and consumer behaviors that are driving it.
As the first quarter of the century approaches its end, you need to remain aware of how these ecosystems are evolving to ensure that your company and customers remain at the forefront of these crucial trends.
1. An upsurge in real-time payments.
Until recently, banks and other traditional financial institutions were responsible for coordinating the exchange of funds between individuals and businesses. However, real-time payments (RTPs) are quickly supplanting this old-school practice.
RTPs make it possible for funds transfers to take place instantly, even across borders. There is much less need to rely on traditional banks or international players like SWIFT.
This is being made possible thanks to an expansion in partnerships between financial institutions, governments, and private networks across Europe, Asia, and the United States.
Players such as Target Instant Payment Settlement (TIPS) in Europe, FedNow in the U.S., Unified Payments Interface (UPI) in India, and the Bank of International Settlements (BIS) cross-border initiatives are likely to grow exponentially, facilitating instantaneous, streamlined international funds exchanges and increasing global payments transparency.
2. Increased digital currencies.
Credit card processing has long been the standard for commercial and consumer transactions. However, digital currencies will no longer be viewed as speculative options and could take their place as viable funds transfer choices in their own right.
By 2025, China’s Digital Yuan and the Digital Euro initiatives will be up and running, facilitating easier remittances and trade in places where conventional banking is difficult to access.
Furthermore, decentralized finance (DeFi) will take its place in the payments pantheon, moving to compete with traditional networks. As costs are reduced and transparency increases, borderless payments will become a reality.
3. Embedded payments and open banking.
Embedded payments make for even more streamlined exchanges of currency, enabling businesses to integrate options directly into their platforms. Whereas purchases were always made in the past using credit card readers and a POS system, this technology will render them invisible.
Meanwhile, open banking will continue to ascend, enabling consumers to gain control over their own finances and share their information with the institutions of their choice.
As a result, apps will start to offer financial solutions tailored to each consumer, including customized loyalty programs and budgeting tools.
4. Enhanced digital wallet capabilities.
Until now, digital wallets offered consumers a secure way to complete purchases of products and services. In 2025, their capabilities will expand exponentially to also encompass investments, insurance, savings, and credit.
This will particularly be the case in parts of the world where traditional banking options are difficult to access.
Global sellers will also be able to capitalize on this trend. Once they configure their systems with their merchant account provider, they will be able to court customers from areas that were formerly unavailable now that these new methods of credit, investment, and savings are on offer.
5. Sustainability and ESG in payments.
Environmental, Social, and Governance (ESG) principles are set to shape the entire payments industry in the years to come, affecting how companies interact with consumers and financial institutions. Emphasis will continue to be placed on green initiatives, including social justice and earth-friendly programs such as rewards for sustainable purchases and carbon footprint tracking.
Furthermore, adherence to these principles by merchants will be recognized and rewarded with sustainability ratings and eco-certifications. Thanks to these directives, customers will be able to channel their spending toward sellers whose values align with their own.
Gone are the days of the simple POS system, merchant account, and payment processing provider. Today’s commercial landscape is more connected and globalized with every passing moment, paving the way for increased accessibility and inclusiveness in all areas of the world, including those that have previously been overlooked and under-served.
In the blink of an eye, digital wallets and currencies supported by the flexibility of open banking will revolutionize the world’s transaction systems.
As a result, economic and social progress will occur, also made possible due to sustainability and ESG principles. As the century moves toward its second quarter, we can look forward to a global payment system that is more equitable, accessible, connected, and responsible.
