A2A payments and embedded finance are all in the spotlight.
The payments market has been faced with many unprecedented challenges over the past two-years, beginning with the pandemic and ending with political and economic events such as Brexit and recent sanctions aimed at Russia.
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Despite all the turmoil, market players continue innovation, which leads to new trends that propel the industry forward. Marius Galdikas is ConnectPay’s CEO. He has shared his thoughts on the current market forces.
Booming A2A Payments
A2A payments are becoming increasingly popular with merchants because of their inherent benefits in terms of transaction speed and cost. A2A payments can be made directly between accounts. This helps to reduce processing fees that accompany card transactions. Merchants have faster access to funds because there are no intermediaries. This reduces friction when making online payments. It’s likely that more businesses will opt to include A2A payments in their checkout process, as startups have already closed millions-worth of seed round funding.
Galdikas stated that card payments are still the dominant choice on the market. However, given the rate at which A2A interest is growing, this could push card schemes into a weaker position. A2A payment providers have some challenges to overcome if they are to be on the same level with other payment methods. One of these is conveying value to shoppers. Merchants, not customers, remain the primary beneficiaries.
The United Nations set a lofty goal to achieve net-zero emission by 2050. Fintechs are taking the lead, helping to reduce their environmental impact, fund green innovation and even offering solutions to other companies to lower their carbon footprint. As the world moves towards a net-zero economy the importance of carbon offset among fintech will only grow, which will likely lead to more ‘green’ innovations.
Galdikas stated that fintechs are digital trendsetters and could facilitate the transition to become carbon neutral for other people. He also highlighted the importance of ‘climate fintech success’ in 2021. CommerzVentures reported that funding for such fintechs was 3x more than it was in any of the previous years.
Embedded financing allows non-banks to provide financial services. This opens up many new opportunities for companies. This could be illustrated by the Amazon marketplace. It cannot, however, issue loans. Affirm, a ‘buy now and pay later’ provider, has partnered with Amazon to allow its clients to get loans.
Barclay reports that embedded revenues for payments in 2020 were $16.1 million. The industry is expected to reach $7 trillion in the next 10 years.
Galdikas stated that embedded finance products are not surprising as they allow more companies to enter the fintech market and offer their customers better tailored services based on spending habits.
Low-code, or no-code, is a method of software development that requires little or no programming skills. This means that specialists with no coding experience can edit and launch new products easily. Galdikas says this is a powerful tool that fintechs can use to create agile innovation.
Galdikas stated that each company is different and therefore an off-the-shelf solution might not be able to support their workflows or processes. “No-code and low-code solutions allow you to build fintech software that is tailored to your company. You can also include diverse experts such as engineers or designers to create a better product.
Metaphors to explore
Although Metaverse is still in its infancy, fintechs have already begun to explore the potential of this virtual world. To fully engage in the digital ecosystem, it is crucial to set up a solid financial services system.
The expert said that Fintechs will likely be one of the key players in Metaverse’s payments landscape due to their digital-first nature. “Despite the fact that Metaverse’s concept is not yet reality, it has the potential for radically changing how online retailers interact and communicate with customers. Fintech will play an important role in ensuring it all runs smoothly.