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Since the health crisis, the payment market is undergoing a large scale transformation spearheaded by both the latest technological innovations and the need to meet customer expectations. These evolutions are prodding market players to redefining their model and positioning…

Simplified wallet-based payment on an mPOS terminal – Photo by Clay Banks from Unsplash

Until a few years ago, we were still reluctant toward the use of contactless or mobile payments. Whereas resorting to cash remains a widespread practice in the Euro zone, amounting to 59% of in-store transactions  (down from 72% in 2019), the payment methods have greatly evolved recently to include instant transfers, payment by way of electronic wallets, and crypto-assets.

These evolutions, which are an indicator of deep transformations in the payments’ ecosystem in France as well as internationally, have accelerated since the health crisis to strengthen the rank of credit cards as the favourite means of payment for French people. In fact, during 2022, the total value of card payments exceeded for the first time that of payments in cash in the Euro zone. However, this situation does not foretell any ulterior changes as the digitalisation of payments progresses.

Among other winners of this transformation, contactless payment has reached 62% of card payments in 2022 (up from 41% in 2019), while instant transfer and BNPL grow more and more popular.’s report shows an increase of 508% in the downloads of BNPL applications in France during 2022.

Game-changing innovations

Against the backdrop of such trends, the impact of digitalisation and the rise of e-commerce are significant. The latest technological and regulatory developments have as a matter of fact fostered a new wave of innovations and disruptions in a context of diversification and increased competitive pressure, with a greater focus placed on the enhancement of the customer and seller experience.

The adoption of those innovations has been strongly sped up by the sudden halt of brick-and-mortar commerce during the health crisis and the disruption of our consumption habits.

In terms of mobile payments, the emergence of “super-apps” gives another boost to application-based payments by offering a full range of services connected to a payment wallet that is specific to the application. These apps are also a successful example of embedded finance, with the direct integration of financial services in the platforms (credit, insurance, etc.).

In brick-and-mortar commerce, the appearance of innovative terminals (SoftPos, mPos…) enables the acceptance of alternative payment methods while making the customer experience more fluid and seamless. In relation to that, the development of systems interconnectivity and the implementation of tokenisation mechanisms reinforces the ability to manage payments in a “unified” manner with omnichannel use cases such as “click-&-collect” or “pay-as-you-go”.

As for e-commerce, the marketplace model keeps on gaining market shares and should display a high-growth profile. According to PMP Strategy’s estimates, marketplaces will exceed 30% of e-commerce transactions in France by the end of the year. This evolution not only includes the development of B2C but also the strong acceleration of B2B marketplaces, which should double in size by the 2025 mark.

Finally, the expansion of complementary services to payments (reconciliation, anti-fraud fight, KYC, stock management…) and their by-design integration in the seller’s ecosystem pave new ways for frictionless transactions and the accelerated development of instant transfer or of solutions such as one-click payment and recurring payment.

Players are compelled to reconsider their positioning to stay competitive

The pace at which the payment ecosystem has evolved has left in its wake a range of companies, including banks, traditional players from the “physical” world of payments, that have not managed to embrace the shift towards digitalization.
On the other side, a number of originally non-banking players have been able to develop their presence in the payment value chain by gaining significant market share.

These PSP or fintech companies, start above all from the payment data challenge to create new services with a higher added value from said data, and thus generate customer loyalty by bringing the offer as close as possible to consumers.

A paradigm change is taking shape

Nevertheless, some initiatives reflect a paradigm shift, with the willingness of certain actors to cooperate more closely in order to amplify distribution or strengthen synergies in terms of offering by integrating the latest innovations and aligning to customer needs.
In this context, the partnerships between banking players and payment specialists are multiplying, such as BNP Paribas’ takeover of Floa to strengthen its position on BNPL, or the Société Générale–Lemonway partnership to sustain the growth of B2B marketplaces. To develop its offer, in particular with regards to acceptance, Société Générale also undertook in 2022 the purchase of the fintech PayXpert. More recently, it was Crédit Agricole’s turn to announce its exclusive negotiations with Worldline to launch a “major player on the French payment market” by 2025. Such announcements show to what extent the banking market seems to take a bend in terms of target model to stay ahead.

With all those developments and despite promising market trends, only players who will manage to adapt quickly to the new challenges of the payment industry will have an opportunity to succeed.

Omar Boughaleb, Consultant for Financial Institutions at PMP Strategy

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