By Jessica Duncan, Senior Director of Insights

Last week, the Venetian in Las Vegas was packed with 10,000+ attendees and filled with energy during the four-day Money 20/20 event. Thought leaders, decision-makers, and influencers assembled in one of the largest global fintech and payments discussions – I considered myself lucky to have been a part of it. As I traveled home and somewhat in jest, I jotted down the top buzzwords that came  to mind from my time at the conference. As I began to revisit the sessions I attended, it was evident that these four words truly are central to the key strategic discussions and partnerships occurring in payments: Frictionless, Embedded, Connectedness, and  Budgeting.

1. Frictionless
The payment experience is equally important to today’s customers as it is to merchants, issuers, and networks.

The easier it is for someone to make a purchase, the better the customer experience and the lower the likelihood of cart abandonment. The concept of a frictionless payment environment covers a broad range of opportunities including contactless technology and mobile wallet adoption.

As the saying goes, everything old is new again…and frictionless is simply the latest payments buzzword. This exact term is likely referenced on many roadmaps and strategic planning sessions as payment providers focus on their next stage of  innovation, like embedded finance and real-time payments. However, this is not often the term used when new solutions are implemented and efficiencies are marketed to the customer. Instead, frictionless is conveyed to the consumer through terms like “smooth,” “fast,” and “easy,” which all point back to the foundation of customer service and loyalty: convenience.

2. Embedded
Embedded finance, the most discussed topic, was implied as having the greatest potential to revolutionize payments.

Frictionless and embedded go hand in hand, and Uber is a good example of an early innovator in embedded payments. For an Uber ride, a passenger does not need to take out their credit card or cash to complete the transaction. The payment is conveniently processed through the app at the time of the ride. Like frictionless, embedded financing will continue to reduce
barriers in the consumer’s experience and allow real-time financial actions to occur at the point of purchase. Embedded payments (think mobile wallets) and embedded lending (think BNPL) are largely where we see this technology in the current landscape, but the functionality can be applied to a variety of different verticals such as insurance and car buying, which is why the opportunity is so vast and exciting for the fintechs operating in this space.

3. Connectedness
“40% of J.P. Morgan investments are focused on expanding the digitization of experiences.”

During the Keynote, Takis Georgakopoulos, Global Head of Payments at J.P. Morgan, talked about what is fueling innovation. For JPM the evolution of payments, as he coined it, is “bridging experiences.” Georgakopoulos addressed the idea that passive browsing is no longer the typical consumer shopping experience. There has been a rapid adoption of “participatory experiences” like shopping through TikTok or Instagram and the need to connect the offline and online experiences is happening now. J.P. Morgan is heavily investing in expanding solutions that will allow customers to pay for purchases with a wearable device, and Georgakopoulos referred to a future state in which customers could even have a completely digital experience within a connected car.

From a marketing standpoint, digital payments are often depicted by showing a transaction occurring through a phone, but for several years PNC Bank has been one of the few companies to incorporate language and use imagery that shows payments occurring through a wearable device. It’s likely we will see more marketing being given to payments through wearables to spur adoption.

4. Budgeting
This word was used frequently in relation to consumer spending, which was no surprise since the economy was a recurring theme during the event.

The most memorable takeaways around budgeting came from a BNPL panel discussion. Paige Fitzgerald, General Manager of Business Strategy and Partnerships of Afterpay, stated that budgeting is the core to the firm’s business model, and they view Afterpay as a “budgeting tool.” Alex Naughton, Head of Klarna UK, stated that their customers are “digitally native” and
looking for “sensible” budgeting solutions. The combination of a point-of-sale installment payment and a budget-conscious audience has resulted in one of the fastest growing payment methods the industry has seen.

With rapid growth has come speculation of risk and sustainability. The BNPL representatives took on questions about how they help their customers understand when payments are due, or the steps taken if users fall behind. Both companies had similar responses, stating that awareness starts at the beginning with clear and transparent communications. Klarna addressed that their BNPL model incentivizes customers to pay, based on the rewards program as well as the freezing of access if they are behind on payments. Afterpay described their model of rewarding positive behavior by starting with low spending limits and rewarding positive payment activity over time. Similar to Klarna, if an Afterpay customer misses a payment, they cannot participate in another BNPL until it is paid. Notably, Afterpay shared payment statistics, which were based on over 20 million active users. Fitzgerald stated that “95% of Afterpay transactions are paid on time. 98% do not incur a late fee and the majority of customers pay off their installment plans early.

Another interesting takeaway was the discussion of the changing demographics of BNPL users. Both companies agreed that the typical customer is currently women in their mid-30s, but the fastest growing segment is users 50+ with a growing adoption rate from older men. When new challengers in the marketplace, like Apple and PayPal, were mentioned, leaders from both Afterpay and Klarna stated that competition was a good thing. Klarna’s Naughton stated “if it’s good for the consumer, it’s good overall.” Similarly, Afterpay’s Fitzgerald viewed the new entrants as “validation that BNPL is here to stay.”

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