Writing for PaymentExpert, Dominic Hofer, CEO and Founder at Loylogic and Pointspay, the specialists loyalty and payments platform, maps out what he believes will be the three key industry trends for the year ahead.
For many of us, the experience of saving pennies in a piggy bank is but a fading memory. Today, even handing cash over the counter is becoming increasingly uncommon as the way we pay for goods continues to evolve.
And, although coins and notes aren’t set to disappear completely for some time yet, the payments industry is constantly innovating new ways to pay. In 2022, three key trends are set to shape the industry; buy now, pay later (BNPL), buy more, pay less with MarPay technology and loyalty points, as well as cashback incentives.
Buy now, pay later: a global phenomenon
Arguably the most widely known and talked about payments trend of recent times, BNPL has permanently shifted the attitudes of many consumers when it comes to paying with credit. Once considered a risky method of payment, the introduction of an interest free BNPL model has led to a dramatic rise in its popularity.
BNPL payments are quick and easy, while taking the sting out of the up-front cost, so it’s no surprise that so many consumers like it. In the UK, for example, where BNPL products have gained a lot of traction, a report from credit reference agency Equifax showed that a record 28% of the UK adult population made a BNPL payment in October 2021 alone, up from 23% in December of the year before. There’s no doubt that BNPL has made its mark on the checkout experience.
However, this model is facing real challenges, as industry rumours suggest greater regulation is on its way in Europe to protect consumers from any potential debt issues. It’s clear players in the BNPL space will need to evolve to ensure users of their payments products are suitably protected from these risks if they’re to stay in business.
2022 will see BNPL providers adapting to comply with new regulation as it emerges, but this will happen alongside continued adoption. Card providers, fintech firms and online banks alike will look with increasing interest at this payment method.
Using loyalty points to buy more, pay less
Loyalty schemes have come a long way over the past few decades. And, as brands and experts look for more ways to win their customers’ hearts, minds and spend, the technology designed to win this loyalty has also seen impressive innovation – including in the payments space.
One emerging technology to keep an eye on in 2022 is “MarPay”, a payments technology built around loyalty points and designed to improve on the legacy of affiliate programmes. It connects merchants with loyalty programme members looking to maximise the value of their points at checkout and allows them to “buy more, pay less” by spending and earning loyalty points instantly at checkout.
This technology prioritises making the customer journey as frictionless as possible by allowing loyalty scheme members to use a combination of cash and points directly with a retailer, making their purchase simpler and more affordable. It’s fast becoming a preferred payment method for merchants, as it provides a notable boost for average basket value, conversion rate and repeat purchase.
Catering to an audience that always wants to get the most from their spend and their brand loyalty isn’t easy. With this in mind, we could see more brands and merchants adopt MarPay in 2022 and beyond as they look for ways to make consumers’ money go further – and loyalty grows stronger.
Cashback incentives – money back in your pocket
Who doesn’t want a little extra cash in the virtual wallet? It doesn’t take an expert to work out why cashback incentives might prove popular with consumers. Offered by many banks, credit cards, specific cashback websites and apps, we’re seeing plenty of brands offer customers the chance to get back money on their purchases.
The importance of customer loyalty to brands is clear, and cashback incentives are now being used as yet another tool in payment providers’ loyalty toolboxes. WhatsApp for example, recently launched its own payments app in India as an alternative to the likes of popular services like Google Pay.
The platform has been testing its cashback incentives as a way of building its user base and reports suggest users can get 51 rupees (or 50 pence) cashback per transaction. Customer satisfaction levels may vary with this approach, as a £1 equivalent spend – for example – sees a great return of 50% cashback, however spending £100 will only lead to a 0.5% return. At the same time, small amounts of money like this can go unnoticed by many shoppers who do not regularly check their accounts for small changes. However, there are plenty of other shoppers who will think, whilst it’s not big money, it’s free – and could certainly build up quickly – so it’s well worth trying out.
The other challenge with this payment method is that some cashback offerings operate using affiliate marketing. Not only does this mean the cashback payment is often slow, but it also means delayed gratification for the consumer and can lead to a drop off in engagement.
As retail brands and payments providers work hard to win and hold on to customer attention – and loyalty – in a fiercely competitive market, we can expect more major platforms to toy with cashback incentives as a way to keep customers engaged.
What do consumers really want?
Consumers have grown accustomed to a range of innovative ways to pay, with new options popping up all the time. Payment providers looking to get ahead should keep two consumer demands front of mind: choice and flexibility. These are the characteristics that define today’s payments world. Increasingly a third demand is joining the race, consumers are also looking for payments providers to deliver value.
Whether it’s instant gratification, a little extra cash or a way to get the most out of their loyalty points, consumers appreciate brands which go the extra mile to deliver something special. We’ve explored the trends set to lead the pack in 2022 and beyond, but one thing’s for certain; payments innovation isn’t set to slow down any time soon.
