ETA Expert Insights: State of Payments – What to Expect in 2023

By ETA Industry Affairs Committee Chairs and Vice Chairs

Earlier this week, ETA’s Industry Affairs Committees presented to ETA members during the State of Payments their thoughts on the trends and changes the industry will see in 2023. The following highlights are the collective thoughts on what the industry can expect in the coming year and the topics that will be part of the committee’s ongoing discussions.

PAYMENT FACILITATOR COMMITTEE

• 2023 will bring growth to embedded payments and the continuation of the Covid impact on our industry. Expect to see a rise in the use of AI, Artificial intelligence before and after the transaction.
• There are many opportunities for payfacs, including the embedded finance and regional banks entering the mix.

PAYMENT SALES & STRATEGY COMMITTEE
Integrated payments

• Where do the ISAs and ISOs find their space in a world evolving around integrations.

Surcharging and Cash Discounting

• This is a boom time for sales organizations and individuals because of its adaptation.
• Pay more attention to VISA/MC, the government, and its overall regulation.
• Organizations ahead of the trend are already looking for the next “new cool thing” in the payments space, as this boom is only expected to last a few years.

B2B/B2G Payments

• An overlooked area for ISAs/ISOs. Yet, as many need to take advantage of surcharging and cash discounting, finding the right technology to service this sector is paramount.
• Look to understand the needs of these merchants and the technology needed to service them.

PCI/CYBERSECURITY COMMITTEE

• The PCI SSC released MPoC in December 2022, significantly shifting how merchants can accept payments on mobile devices.
• Remote access vulnerabilities continue to grow as our workforce works from home.
• Advances in fraud detection and prevention continue to grow, and the increased number of service providers supporting these efforts will reduce card-not-present transaction fraud.

BANK COMMITTEE
Banks will spend more time in 2023 focused on internal operations and efficiencies. 2020 and 2021 rapid growth following PPP and other stimulus money pushed banks to grow staff and technology rapidly.

• Interest rates put downward pressure on many traditional revenue streams, so banks will look to reduce costs and make their new systems and people more efficient.
• Banks will also be actively looking for alternative income streams in areas like payments, fintech partnerships, and specialty services.

Faster Payments will continue to grow and make a difference in some areas and targeted use cases.

• The launch of FedNow in mid-2023 will bring interest and engagement from bank executives and technology partners. Still, expectations are that it will be well into 2024 before we see widespread enablement across financial institutions. Moreover, adoption will be slowed by limited banker knowledge and sluggish deployment capabilities from the most significant bank operating system processors, the primary technology providers for most banks in the U.S.

Growth of Digital Banking or Digital Transformation

• Increased cloud-based solutions.
• Automated account opening and loan origination (without visiting a branch).
• Customer experience over customer service – it is what consumers are demanding.

Growth of Embedded Payments in ACH B2B space

• Bank’s partnership with FinTechs offers them more financial services to sell

RETAIL TECHNOLOGY COMMITTEE
Buy Now, Pay Later

• Consumers are looking for BNPL options. Explore how you can integrate this into your checkout experience.
• It’s a small portion of the US payments system today but rapidly growing, up 230% since the start of 2020.
• While it is popular with consumers, regulatory concerns exist with lawmakers and CFPB.  Regulation may be coming and mimic credit card regulations.

FED Debit CNP expansion

• Effective July 13, debit card issuers must enable merchants to pick from at least two unaffiliated payment card networks.
• Applicable for CNP (eCommerce) environments.  Initially, when rolled out in 2011, the focus was on CP environments.
• FED indicates that this move will encourage competition and incentivize networks to bolster fraud prevention.
• POS systems, gateways, and other processing systems focusing on eCommerce/CNP environments should begin enhancing their debit processing capabilities to include support for multiple debit networks per card issuer requirements.

MOBILE PAYMENTS COMMITTEE
Removing friction from payments is better for both customers and businesses. However, as an industry, we must continue educating consumers and building merchant confidence in paying with and accepting contactless payments.

We continue to see growth in the P2P space and expect this trend to continue in 2023, with users paying peers and businesses via this technology.

The Mobile Payments Committee will explore how government-issued identification cards (driver’s licenses, etc.) will play a role in removing friction in the payments space.

RISK, FRAUD & SECURITY COMMITTEE
The threat landscape in 2023 is a technologically sophisticated ecosystem of interrelated bad actors.  In previous years, the illicit commerce landscape was more fragmented. The threats were typically smaller event-based groups that would burst into a payment ecosystem, cause harm, and fade back. However, in 2022 and 2023, we see the emergence of the collaborative threat actor.

• Various groups are partnering with each other to share techniques and technology to exploit an even bigger landscape.

The cooling of the economy will fuel the exploitative threat actor landscape.  As a result, we expect to see an influx of low no; value accounts leveraging the uncertainty in the marketing areas of concern: ICOs, supplemental income schemes, imposter job offers, money mules, forex, gov’t imposters, and elder emergency.

The global sanctions shifting landscape will continue to disrupt previous risk models. The BO legislative landscape will continue to evolve.  The discussion around the link between privacy and transparency will also be ongoing as the ramifications of the EU court rulings become more apparent. We continue to see attention placed on the role of beneficial ownership registries in combatting financial crime.

CRYPTO COMMITTEE
In 2022 we saw crypto and blockchain reset, like the dot com bubble. In 2023 we will see more utility, compliance, and regulations which will bring more confidence in using crypto and blockchain for payments.

Current real-world use-cases

• CBDCs and Stablecoins
• Fractionalized Real Estate Ownership
• Emerging markets like gaming and DeFi
• USDC for cross-border options, payouts, marketplaces, etc.

ETA members are invited to join an ETA Industry Affairs Committee. For more information, please contact Scott Talbott, SVP at [email protected].