Changes in the way consumers spend money and the ever-increasing pressure for retailers to remain competitive continue to influence innovation in the payments industry.
Providing both challenges and opportunities for the tech industry, payment innovators must stay focused on delivering meaningful solutions for both consumers and retailers.
Writing for Payment Expert, UK Country Manager for Clearpay, Rich Bayer, outlines how modern day payment methods have birthed new consumer habits and therefore why up-to-date regulation is needed for it to flourish further for merchant growth.
It’s predicted by UK Finance that come 2033, we’ll be making 7.8 billion more payments annually compared to last year and whilst consumers now spend less money on each individual transaction, they do this more often.
In recent years, there has been a proliferation of disruptive solutions as tech and financial services players innovate at unprecedented speed. We only have to look at Open Banking, digital wallets and central bank digital currencies to witness how the transactions landscape has advanced.
Responding to consumer demands
Payments are not just about the exchange of money – they enhance the consumer experience and can drive positive user engagement, which in turn can build brand trust and loyalty.
Now, consumers seek flexible solutions that are not only effective, but also seamless and secure. Last year, we witnessed the rise of multi-payment purchases, with a notable increase in the popularity of Buy Now, Pay Later (BNPL) products (UK Finance). The consumer centric formulation, which allows a customer to split payments into three/four instalments over a few short weeks and is interest free, is a simple and effective construct that is reshaping consumer spending.
In May 2024 alone, Adobe Analytics reported that UK consumers used BNPL to finance £1.22bn worth of purchases, representing 15.4% of total online spend.
Continuing to meet evolving consumer expectations requires the industry to develop products that respond to demand and cater to differing generational preferences and societal backgrounds.
By improving payment accessibility, expanding consumer choice and fostering transparency, we can help to promote economic empowerment and open up financial inclusion.
Catering for small businesses
These benefits extend beyond consumers; innovative payments products and integrated solutions also offer advantages for UK small businesses. Helping them improve their efficiency by reducing costs and streamlining operations, effective transaction processes can ensure smoother cash flow through the supply chain – a critical factor for small businesses reliant on prompt payments.
Offering consumers a variety of payment options at the checkout helps retailers reduce cart abandonment as shoppers have choice and flexibility to select a payment method that suits their preferences.
Between August 2022 and 2023, Clearpay contributed nearly £1bn in additional sales for our UK merchants. During this period, we also helped businesses save approximately £100m through reducing fraud, enhancing order management, improving inventory handling, lowering marketing costs, decreasing default rates, and reducing returns.
Clearpay has seen firsthand how more personalised and transparent checkout methods can build consumer trust and loyalty towards brands. Our results illustrate how payments innovation can deliver tangible business benefits, in turn contributing to the UK’s wider economic growth.
Lessons to be learned on regulation
For payments to evolve, they must be supported with a robust infrastructure and appropriate regulatory frameworks. The UK can learn from countries like Australia and New Zealand, who have made strides towards balanced regulation that promotes innovation whilst adapting to changing consumer behaviours.
To emulate this, we must see a collaborative effort between government, regulators and industry, to create an environment where payments can flourish, as the UK can continue to lead the global effort to a fairer financial future.
The incredible advancement in tech capabilities has drastically changed the payments landscape for the better. The traditional financial services sector has been shaken up by efficient, seamless and flexible new tools that deliver for retailers and empower consumers.
This continued pace of innovation will help drive economic growth and maintain the UK’s status as a global leader in payments solutions.
