By Scott Abrahams, SVP Business Development and Fintech at Mastercard 

1.The indomitable rise of green fintech

Scott Abrahams, SVP Business Development and Fintech at Mastercard

Climate change has topped the news agenda throughout 2021, and rightfully so. In 2022, it is my sincere hope that governments, organisations, and individuals across the globe take decisive action to tackle the climate crisis, and the financial services industry is no exception. 

There is a huge amount of innovation in this space, and we have seen good progress in 2021, with fintechs like Helpful, ekko and Doconomy leading the charge. But payments is just one part of it – there are also new solutions cropping up in other areas of financial services, like the Government’s new green savings bond through NS&I and in pensions, a UK company, Cushon launched the world’s first net zero now pension.

In 2022, I expect to see continued momentum and a surge of new entrants into this space, as well as increased interest from consumers in how the choices they make can contribute to a greener, more sustainable financial ecosystem.

2.The digital new normal

Many of us are already living digital-first lives, and this has been dramatically accelerated by ongoing global events. Mastercard data shows that at the beginning of the pandemic, there was a larger shift to digital payments in 10 weeks than in the preceding five years. At the European level, the pandemic has pushed contactless payments to more than 80% of all in-store card transactions, and in the UK, the online share of spend in the retail sector is five percentage points higher than the pre-pandemic trend, a 21% gap.

Since the start of the pandemic, there has been a decline in cash use and an increase across all digital payment methods. Of those who used digital payment technologies in the last year, 65% are using smartphone payments more, 64% are using QR code payments more and 59% are using contactless more. The uptake of the usage of mobile banking apps has also increased enormously, and this shift will likely stick, even after the pandemic eventually becomes history. In fact, one in four (25%) say they’ve used new digital payment technologies they wouldn’t have used before the pandemic.

3.Financial inclusivity must be prioritised

Mastercard data found that 30% of people don’t feel comfortable using digital payments, and that older generations are still far less likely to have a banking app than those younger than them – just 42% of over 65s and 57% of 55–64-year-olds have a banking app. 

Despite the plethora of benefits that come with the mass migration to digital payments, there remain those that prefer more traditional transaction methods, and we cannot leave these people behind. It is the responsibility of the payments industry, policymakers, and government to ensure these people are not excluded as we move towards a more digital economy. This must remain a key focus in 2022.

4.5G will enter payments

For consumers, 5G’s high-speed, always-on connections, will mean they’re provided with more choice, information, and personalised content both before, during and after a transaction. The level of connectivity it offers means that machines, devices and even objects will be able to actively participate in transactions.

In short, 5G will revolutionise payments, and we will step closer to this becoming reality in 2022. 

5.Choice, flexibility, and security will become non-negotiable

I could speak about payment methods until the cows come home, but let’s be honest – nobody wakes up in the morning thinking about how they can’t wait to use a payment card or an app! It is what they are buying that motivates them. Regardless of what they are buying or how they choose to pay for it, their decision will be made based on a core set of values – convenience, flexibility, and safety. 

In 2021, we’ve seen an uptick in popularity of payment methods that offer exactly this, including Buy Now Pay Later (BNPL), which we announced our own plans for in September 2021 to meet the growing demand for flexible, digital-first payment options.

As we move into 2022, the payment companies that succeed will be those that prioritise and deliver payment methods that allow people to pay and get paid safely, in real-time, and in a way that works for them.

6.Open banking

Open banking is already present in many parts of our lives, including in choosing banking services, demonstrating our creditworthiness and in some personal financial management (PFM) tools. It means we can make our financial data work for us and open access to more streamlined and flexible financial experiences. 

In areas such as savings, for example, open banking tools can provide huge value to consumers by providing personalised tips to help them make more informed financial decisions. With the sum of excess consumer savings in UK expected to reach approximately £193,188 million in 2022, this is an area that holds huge potential.

To date, uptake in Open Banking has been slow and consumers haven’t benefitted as much as they could have, but in 2022 we can expect to see greater adoption of services for both individuals and small businesses. The financial services innovators that capitalise on this will be the ones that thrive in a consumer-centric, data-driven economy. 

7.Central Bank Digital Currencies will gain momentum 

The last year has shown just how essential digital payments are to the global economy, and governments around the world have taken note with some now looking to their central banks to issue their own digital currencies, known as CBDCs. These are digital and equivalent representations of physical currency but easier to handle, less vulnerable to fraud and, as connectivity increases and mobile devices become more widespread, an effective way to include more people in the digital economy.

Over the next year, we should expect to see developments in this space, and will see central banks, financial institutions and governments coming together to help shape the future for CBDCs.