Digital payments surge has staying power

As the COVID-19 pandemic has cut a deadly path across the globe, killing too many people in countries far and wide, it unexpectedly set off a revolution in digital payments to cope with its impact.

In 2022, the demand for contactless, online, digital, frictionless and speedier payments will only increase as the pandemic continues to drive innovation in the industry. That means upstart fintechs, such as digital payments company Stripe and buy now-pay later provider Affirm, will keep offering new ways to make payments as they suck up billions in investor dollars aimed at creating faster, easier and cheaper worldwide payment tools.

From offering services to migrant workers desperate to send wages home to giving retailers new ways to provide installment financing to arming businesses with new cybersecurity tools, the field of payments will keep growing in 2022.

Consumers have been the target of many new payment services as they flooded online markets, but businesses are an even bigger bulls-eye for payments purveyors building new markets. 

As new entrants tout their services and products, they're driving more competition and partnerships with major incumbents like card giant Visa and digital payments pioneer PayPal. The most adventurous among them are wading into cryptocurrencies and other digital asset services.

These dynamics are at the core of trends below that will keep the payments industry ablaze in 2022, with government regulators and lawmakers trying to keep the fire under control.

Prepare for battle

A spat between Amazon and Visa over merchant transaction fees is bringing a long-simmering dispute to a boil, and could spill over into more fights between card issuers and their retail partners. 

The National Retail Federation (NRF) estimates swipe fees have skyrocketed from $20 billion a year in 2001, when the trade group began tracking them, to $110.3 billion as of 2020, and show no signs of slowing.

“The issue has been exacerbated by the increase in online shopping during the Covid-19 pandemic because virtually all e-commerce purchases are paid for with credit or debit cards,” the NRF has said. “Swipe fees are higher for online purchases than in-store purchases, and most buy online, pick up in-store and curbside delivery purchases are subject to online rates as well.”

As part of the spat, Amazon announced in November that it would no longer honor United Kingdom-issued Visa credit cards come Jan. 19. The e-commerce giant also is reportedly considering dropping its card co-branding deal with Visa and replacing it with rival Mastercard.

Wall Street analysts described Amazon’s move as a negotiating tactic. Indeed, Visa Chief Financial Officer Vasant Prabhu told Reuters in November that the company expects to resolve its differences with Amazon.

Of course, that’s easier said than done.

Amid the rise in e-commerce, there will be more disputes between payment networks and retailers “as both look to adapt to the new digital marketplace,” said Marwan Forzley, CEO of digital payments provider Veem. “On a larger scale, organizations and credit card networks will need to address this trend in the coming months,” he said in a statement.

It’s not just Visa that is dependent on swipe fee income, its rivals Mastercard, American Express and Discover Financial also rely on the interchange fees. According to the Nilson Report, total U.S. swipe fees jumped 70% over the past decade to $110.3 billion in 2020, from $64.6 billion in 2010.

Mushrooming BNPL will add B2B in 2022

Spurring the fee wars are challengers providing new payment tools. Buy now-pay later installment financing is one of them that hooked consumers last year and is expected to gain widespread adoption in 2022.

Amid growing interest in BNPL, which allows consumers to spread out payments over a defined period of time, the space has gotten crowded. BNPL players such as Affirm, Klarna, Afterpay and Sezzle are competing with digial payments behemoth PayPal, card giants and large and mid-tier banks.

BNPL has benefited from massive e-commerce growth during the Covid-19 pandemic. Menda Sims, chief payments officer at digital payments provider Stax, expects current inflation levels could nudge even more consumers toward the installments route.

“To me, I think the big headline is, it’s not just with the small minority," said Nilesh Vaidya, global industry head of retail banking and wealth management for Capgemini Financial Services. "It’s getting more and more mainstream."

BNPL transactions are projected to reach $995 billion by 2026, according to a Forrester report, and installments startups say they gain tens of thousands of new customers weekly.

“What I would expect really going into 2022 is an acceleration of adoption,” said Experian Senior Vice President David Bernard. “Double-digit adoption on the consumer side, and on the merchant side.”

Once BNPL providers establish a relationship with consumers, Vaidya expects they’ll delve deeper into financial services and broaden their services, offering loans, brokerage accounts or crypto. Affirm, Afterpay and Klarna have already introduced new products like debit and rewards programs.

The financing approach may also being to win over businesses. It’s exploded on the consumer side, but “we’ve hardly scratched the surface when it comes to businesses,” Bernard said.

That shift from consumers to commercial contracts could have major implications for other industry players, “because it’s a bigger chunk of money that will move away from the card networks into the loans,” Vaidya said.

Still, BNPL practices may also face more regulatory scrutiny as consumers fall behind on payments. Mizuho Americas analysts point to delinquencies and charge-offs rising across BNPL operators, and the frequency of consumers missing payments or borrowing through multiple apps.

Mobile wallets bulge with services

BNPL tools are one of the many apps bulging in the increasingly ubiquitous mobile wallets packed in Americans’ purses and pockets. Using their phones for payments is likely to become a bigger part of daily habits in 2022.

The deadly COVID-19 pandemic enticed consumers to try contactless apps, and now they’re spurring others on. Watching someone in the morning coffee line pay with a phone makes others want to get on board with the latest tech. 

Mega payments processor Fiserv documented the growing U.S. affinity for mobile wallets. In an August survey of 3,000 U.S. adults, 68% had used a digital wallet in the past year, compared to 58% in 2020 and only about half in 2019, the company said.

The U.S. has lagged other parts of the world when it comes to adoption of mobile wallets, and it’s becoming a bigger opportunity cost as companies like PayPal and Square pack more finance functions into their “super apps.”

Gr4vy CEO John Lunn predicted 2022 will be the year that mobile wallets “rise to prominence,” he said by email. The shift will be driven by merchants moving away from card “swipe” fees and younger consumers opting for alternatives, said Lunn, whose San Mateo, California company provides cloud-based payment services for businesses.

“It’s generational,” said Daniela Hawkins, a consultant in the field at the firm Capco. Municipalities and businesses will drive changes in consumer behavior with payment possibilities they offer, Hawkins said, citing city transit systems and the retailer Walmart experimenting with new approaches.

As the pandemic arrived in March 2020, Walmart announced a contactless payment option in which customers could pay for goods using a Walmart payment app on their phones to scan a QR code at checkout.

Increasingly, merchants and organizations will consider data they can collect from payment tools as valuable, said Tappit CEO Jason Thomas, whose company aids pro sports teams in collecting fan information. “The organizations are realizing for the first time that they don’t want to give the data away,” he said.

Cross-border payments climb

In a completely different arena, demand to send money across borders is on the rise, despite a hiccup in 2020, and companies that make it easier and cheaper to do so are benefiting.  

Most such remittances are used by migrant workers to cover the essential needs of loved ones back home. In a November survey by money transfer company Moneygram International, 81% of respondents said they plan to send at least as much money in 2022 as they did in 2021. And 83% said their family and friends’ needs increased in 2021–as they also did the year before.

Sending money from one country to another through banks can be a costly and lengthy process, as checks and money orders are processed and currencies are exchanged. While incumbents in the money transfer business, like Moneygram, are expanding services, upstart providers such as Wise, formerly TransferWise, market themselves as speedier, digital-based alternatives. 

The money sent across borders provides support for food needs, healthcare and housing, especially as people continue to grapple with the coronavirus pandemic. 

"The pandemic helped accelerate a major digital shift in 2020, and that momentum has clearly continued throughout this year," Moneygram Chief Executive Alex Holmes said in a press release. “In the coming year, you will see us go deeper and wider in our direct-to-consumer digital offerings." 

About 200 million workers send such payments, and about one in nine people globally may be supported by them, Visa said in a December report, citing data from the United Nations.  

While the pandemic reduced cross-border transfers generally last year because of lower employment in wealthy countries and due to stay-at-home orders, new lower-cost digital transfer services are taking a bigger share of the business, Visa said.

“Even as overall remittances declined in 2020, digital remittances grew strongly and are offering important benefits to those able to take advantage of them,” Visa said. 

CBDCs take center stage

When it comes to digital assets, 2022 will likely be the year that talk of a U.S. central bank digital currency overtakes crypto banter.

Cryptocurrencies from Bitcoin to Dogecoin are only slowly gaining much traction as a form of payment, even as crypto’s worldwide value soared this year to $2 trillion. 

“It is really hard for anybody to see cryptocurrency actually becoming a fiat currency that is accepted as a medium of exchange,” American Express CEO Steve Squeri said at a December webcast event. “You cannot have a value of something on a Friday, when you get your paycheck, be $48,000, and then on Monday, it’s worth $36,000, and then Tuesday, it’s worth $60,000. I don’t know how people can live like that.”

More consequential to Americans is the potential need for a central bank digital currency, or “digital dollar” stablecoin.

There are nine countries that have launched a CBDC, and another 30 are in the process of developing one, according to the Atlantic Council, plus 40 are researching the possibility, including the U.S.

The U.S. Federal Reserve is overdue on delivering a “white paper” report regarding a CBDC, but it’s still mulling the idea. The Federal Reserve Bank of New York announced this month that it’s partnering with the Bank of International Settlements to create a research center that will explore such innovations. 

“There will be (a U.S.) centralized bank digital currency. Why? It actually becomes a national security issue,” Squeri said at the event. “China is really moving very, very quickly from a centralized digital currency, and they’d like nothing better [than] to have everything traded in the Chinese RMB. Right? I mean that’s the big one.”

While cryptocurrencies can be dismissed as volatile assets beholden to celebrity tweets, the blockchain technology that undergirds digital assets and delivers value on a fast, shared international ledger is less easily cast aside.

“The technology is extraordinarily useful,” said James Angel, an associate professor at Georgetown University’s McDonough School of Business, also a former member of the Fed’s Faster Payment Task Force. “It can be transferred person-to-person, 24-7 around the world.” Such digital stablecoins are much more useful than some funny coin someone created that’s being traded like “crypto beanie babies,” he said.

Urgent role for cybersecurity

While consumers have become more comfortable than ever making payments online, fraudsters have geared up to exploit their growing complacency.

That's why 2022 will be the year that cybersecurity companies usher in more advanced technologies designed to stop digital criminals.

The rise of e-commerce, the growth of non-cash payments and a jump in cyber threats will keep fueling a heightened focus on cybersecurity in payments, according to a Capgemini 2022 payments trends report.

Payment scams and fraud have plagued businesses as mobile payments have become more popular, and federal officials have warned of ransomware risks.

Fraud is expected to cost the debit and credit card industry more than $400 billion in losses over the next decade, according to industry research firm Nilson Report, which cites chargebacks as a growing problem.

Meanwhile, cryptocurrencies are also attracting cybercriminals’ attention as the value of digital assets balloons.

Overall, cybersecurity damages could climb to $10.5 trillion by 2025, according to an Argus Research report.

To tackle the issue, regulators and financial institutions are turning to artificial intelligence and machine learning, data analytics, cloud technology, Capgemini said. Strengthening government regulations on cybersecurity and digital identity is also in the offing. 

The private sector is on top of the problem too. Nearly two-thirds of businesses plan to boost their fraud detection budget, consumer credit bureau Experian said in a fall report. 

Behavioral biometrics, like tracking consumers’ swiping, typing or phone-holding patterns, will be embraced in 2022, said Experian's Bernard. He also expects more use of artificial intelligence to throw up hurdles, like authentication prompts, if something is amiss, he said. 

“It’s an arms race,” said Bernard, whose Experian purview is strategy, marketing and digital. “You need several layers, because there’s not a single tool or single data set to combat fraud.”

Frictionless experiences are crucial, unless there’s a risk of fraud, he noted during an interview. Security is a top priority for consumers, credit bureau Experian’s recent Global Insights report revealed.

Validating consumer identity with digital IDs also could be pivotal for payment security, said Capgemini's Vaidya.“It could change the game on how the transactions are processed and the information is shared, and, hence, how it is safely managed,” he said.

Regulators zero in on payments

Heading into 2022, creating safety in the payments sphere means no shortage of regulatory challenges from the Consumer Financial Protection Bureau (CFPB), and it’s being egged on by Congress.

In October, CFPB Director Rohit Chopra demanded Google, Apple, Facebook, Amazon, Block (formerly Square) and PayPal provide the agency with detailed information about their payments practices, saying “little is known publicly about how Big Tech companies will exploit their payments platforms.”

The agency is acting as banks and consumer groups complain that emerging fintechs have an unfair advantage because they aren’t subject to the same regulations, such as securing confidential consumer information from hackers.

The bureau’s data request is the start of this story, said Isaac Boltansky, director of policy research at the New York-based investment bank BTIG. “My sense is that the next mile marker will be the release of an aggregated report with takeaways from the data,” he said by email. 

The CFPB’s investigation will influence its rulemaking efforts, specifically with respect to consumer access to information about the financial services provided, he added. “This rulemaking, which is expected to progress next year, is vitally important in the context of data portability and open banking,” Boltansky said.

In December, a group of U.S. senators urged the CFPB to take action on buy now-pay later (BNPL) services, and the agency complied, issuing a separate demand for information from five of the biggest BNPL providers. In a Dec. 15 letter to the agency, the Democratic senators said BNPL services “have the potential to cause consumer harm,” and lack consumer protections that credit cards offer.

On another front, the burgeoning earned wage access industry could face speed bumps too. EWA providers include a slew of fintechs providing workers with early access to their pay. A consumer advocate coalition in October urged the CFPB to reconsider 2020 actions that smoothed the way for some industry’s services and fees.

It’s not just the fintechs that are in regulators’ sights. The Visa-Mastercard duopoly has been under increasing scrutiny too. Indeed, Visa is grappling with two federal investigations, by the Federal Trade Commission and the Justice Department, that could have broader implications for the industry.

Dive Brief:

• Following the winter holidays shopping bump, reports from card companies Mastercard and Visa indicated consumer spending has strengthened despite the ongoing COVID-19 pandemic and rising inflation.
• The Mastercard SpendingPulse report showed that January U.S. retail sales increased 7.2% over last year, and online sales rose by 10.4% from January 2021. Among the categories that saw growth were apparel, electronics and appliances, per the report.
• Visa's Spending Momentum Index was 102.4, slightly lower than 109.4 in December, indicating spending remains strong after the holiday sales rush. Visa attributed the dip to the omicron variant of COVID-19, but noted the surge did not completely disrupt the economic recovery.

Dive Insight:

The Visa and Mastercard reports reflect a cautious optimism about consumer spending at the start of the year. Mastercard's report attributed the increase in consumer spending to income growth, increased consumer savings and the slow return of experiential purchases, such as restaurants.

The SpendingPulse report noted that e-commerce sales increased 110.1% compared to pre-pandemic levels, signaling a broader shift towards online shopping. Compared to 2019, total January retail sales were up 22.1%, Mastercard found.

Mastercard's report included travel services, such as airlines and lodging, in its U.S. retail sales figure. The emergence of the omicron variant disrupted the travel industry's recovery, which spelled trouble for card issuers hoping for a boost in travel spending.

"Coming on the heels of the holidays, January typically marks a month of returns and exchanges. However, the strong growth across sectors reflects the optimism and eagerness for the year ahead," Mastercard senior adviser Steve Sadove said in a statement. "With nearly all sectors up, we see consumers returning to their shopping habits with a continued emphasis on digital."

Meanwhile, Visa's research reflected a slight downturn across multiple categories from the holiday spending peak in December 2021. According to the Spending Momentum Index, discretionary purchases dipped 3.9 points from December, and non-discretionary purchases also dropped by 2.4 points. The report also pointed to severe winter weather as a factor in declining consumer momentum.

Consumer demand has been less affected by each COVID-19 wave, the Visa report noted, but business disruptions have increased, playing a part in rising inflation.

"The SMI readings continue to reflect that there is a clear indication of spending growth moderation in January," Visa's chief economist Wayne Best said in a statement. "That said, we expect more robust spending in the months ahead as virus concerns slowly subside."

Dive Brief:

• An 82% majority of small and micro businesses responding to an annual outlook survey by Visa said they will accept digital payment options this year, according to a Wednesday press release from the card network company. About 46% of consumers polled said they’ll turn to digital payments more frequently in 2022.
• Nearly 60% of the businesses said they're only accepting digital payments, or plan to accept only such payments within the next two years. Close to one-fifth said they're already cashless. Reflecting the buzz around cryptocurrency and its use as a form of payment, 24% of businesses surveyed told Visa they plan to accept digital currencies like Bitcoin this year.
• Among consumers, 16% are already exclusively using digital payment methods, and 25% believe they’ll make this transition over the next two years.

Dive Insight:

Visa’s study underscores how the digital payments revolution isn’t limited to large businesses. The San Francisco-based card giant polled 2,250 small business owners and 1,500 consumers across the U.S. and in eight other countries in December.

Of course, Visa is in the business of helping merchants move in the direction of increasing their digital payment options, giving them a slew of card-related tools to process payments digitally.

The COVID-19 pandemic propelled the move toward faster, contactless payments, leading many consumers to use innovations like mobile wallets for the first time. The Federal Reserve expects some of these pandemic-induced behavioral changes in payments could stick.

Many entrepreneurs say these adaptations are crucial: About three-quarters of small businesses told Visa they believe accepting new forms of digital payment is essential to their growth in 2022.

Visa's global head of merchant sales and acquiring, Jeni Mundy, said having the right payment scheme goes beyond making the sale. "It’s about creating a simple and secure experience that reflects one’s brand across channels and provides utility to both the business and its customer," Mundy explained in the release. "The digital capabilities that small businesses built up during the pandemic – from contactless to e-commerce – helped them pivot and survive."

Nine in 10 small businesses with an online presence said pivoting to e-commerce helped them survive the pandemic, Visa reported. On average, 52% of their revenue came through online channels over the past three months.

Still, pandemic pivots haven't been easy to execute and small business owners called the COVID-prompted shift in consumer habits a top challenge in 2022, according to the press release for another recent survey from banking behemoth JPMorgan Chase. About a quarter of small businesses have implemented more contactless payment options to keep up with consumer preferences, according to that survey released Jan. 5.

Businesses "now have a stronger sense of how to remain competitive in the current economic landscape," said Jim Glassman, head economist for JPMorgan's commercial banking division, per the news release.

When shopping in brick-and-mortar stores, 41% of consumers have abandoned a purchase because digital payment options weren’t available; this was even more common among younger consumers, Visa discovered.

More than one-third of consumers named digital payment acceptance as one of the top five factors, excluding price, that would influence their merchant choice. Consumers see the shift to heavier reliance on digital payments resulting in easier online shopping (47%), reduced risk of robbery (38%) and convenience (37%), Visa said.

As these changes pick up steam, digital wallets are expected to handle more than $10 trillion in global transaction volume by 2025, recent research from rival Discover Financial Services indicated.

Businesses in other countries were more likely to say they'd take digital currencies as payment this year, with 19% of U.S. small businesses planning to do so, according to a report this month from the news outlet Reuters, compared to more than 30% in markets like Hong Kong or Brazil.

Visa and its Purchase, New York-based rival Mastercard have each bolstered their efforts to enable merchants to accept cryptocurrencies. Stephen Pair, CEO of crypto payments processor BitPay, told PYMNTS the number of businesses using such tools to take crypto payments is small but on the rise, and “there could be an inflection point in 2022 where it becomes more ubiquitous.”

Ultimately, though, not all are willing to drop cash: 16% of small business owners told Visa they’ll never switch to digital payments only, and even more consumers (23%) said the same.

PopID CEO John Miller aims to raise about $50 million in coming months for the software company as it attempts to scale its business that verifies consumer identity based on a photo of an individual's face.

Pasadena, California-based PopID has collected $25 million in funding so far, mainly from its parent company, which is CaliBurger restaurant holding company Cali Group, and its partners.

Launched four years ago, PopID's face-pay technology was initially used at the CaliBurger restaurants before it became popular at small and medium-sized restaurant chains in southern California college towns, Miller said, and it now has 85,000 users.

"You get 5,000 to 10,000 college students enrolling in the platform and then using it everywhere they go around campus, to buy pizza and tacos and haircuts," Miller said.

How it works: A user submits a selfie when enrolling with PopID's PopPay and links a credit or debit card to their account. When that user goes to pay at merchants using PopPay, a camera snaps a photo of the customer's face and brings up payment information linked to their account to complete the transaction. Photos taken at the point of sale are saved for 14 days for fraud purposes, Miller said. The payment method reduces merchants’ payment processing fees, Miller said, since PopID floats $50 to a user for them to spend, then charges their card once they’ve accumulated $50.

Miller acknowledged expansion plans – to establish more of a presence nationally and globally – are ambitious, so the company is targeting a funding round in the $50 million range that would close in early June. The exact timing, however, is likely to depend on the current market.

"Assuming the markets are healthy, we’ll raise capital," Miller said. "If the world falls apart, we’ll hunker down and just keep executing with our current balance sheet." In the latter case, PopID may opt to wait until September to raise more funds.

A fresh infusion of capital would go toward facilitating the company’s rollout in the U.S., as Miller targets partnerships with brick-and-mortar chains that offer national scale, and on the international stage through joint venture partnerships. Last fall, PopID partnered with SoftBank’s Japan Computer Vision to roll out PopPay software in some Wendy’s First Kitchen locations in Tokyo.

With its portfolio of companies focused on restaurant and retail tech, including Kitchen United and Miso Robotics, Miller’s Cali Group has invested "as much capital as we can in the early stages" before seeking outside investors, like Alphabet's venture arm GV, for later funding rounds to scale the businesses.

"I think we’ll do something similar with PopID," said Miller, who's dating actress Jennifer Garner.

Facial verification to enable payment has become popular in China with Alipay, and that has Miller confident the technology could become the favored payment method elsewhere in the world.

As the payment industry focuses on faster, frictionless experiences, the use of biometrics is poised to skyrocket. Amazon has brought its palm pay abilities to some Whole Foods locations. Recent data from Juniper Research revealed the use of biometric cards — with embedded fingerprint sensors — will jump over the next five years. Shipments globally are expected to total 173 million by 2026.

There is some hesitation, however, around such face-related technology. Consumer interest in paying this way remains limited: Only 16% of U.S. respondents said they're likely to pay via facial recognition rather than with a payment card, according to 451 Research’s VoCUL: Connected Customer, Disruptive Technologies 2022 survey. Gen Z and millennials showed the most interest, at 23% and 18%, respectively. 

Limited consumer familiarity could suppress investor excitement, but "if facial biometrics vendors can showcase a robust ecosystem of hardware and software partners, this will help demonstrate to investors that there is a pathway for broader market adoption," said Jordan McKee, principal research analyst with 451 Research, part of S&P Global Market Intelligence.

PopID’s introduction on college campuses was strategic, Miller said, since Gen Zers "have grown up taking pictures of themselves to do everything and putting them all over the internet."

"There’s a generation of consumers that this platform makes a lot of sense for," and there are others Miller doesn’t expect will take to the idea. PopID will remain focused on its target consumers and the merchants that serve them, which is often fast-food chains, Miller said.

In response to the technology, Illinois, California, Texas and Washington have enacted biometrics-related laws, while Oregon has statutes related to facial recognition. The Internal Revenue Service recently backed off a plan to have taxpayers submit selfies to log into online accounts, NPR reported.

Miller referred to PopID’s technology as "face verification," and stressed consumers opt-in to the service. "We only take your picture and do biometrics at the point of sale if you say, affirmatively, I want to check in with PopPay, or I want to use PopPay to checkout," he said.

The company's approach is fundamentally different from what those states have regulated, which relates to surveillance and lack of consent, Miller argues. In states that have enacted laws to regulate facial recognition technology, "we’ve gone into the market to very clearly distinguish what we’re doing, written our terms and conditions to make it crystal clear that this is opt-in, consent only," he said. 

Still, Miller added, the company has spent a fair amount of time reviewing the statutes with lawyers. While he said they’re confident such statutes don’t apply to PopID, Miller acknowledged the public will continue to have questions and the regulation of facial recognition technology will be a recurring issue. 

"We have to distinguish ourselves to make sure people understand we’re sort of the pro-consumer face ID brand," Miller said. 

Educating consumers on the security and potential benefits of biometric payments will be key to furthering interest in the payment tech, McKee said.

Dive Brief:

• After launching authentication initiatives for various high-end product categories, EBay is debuting its first digital wallet for users to store their sales revenue and use it to purchase new items or pay selling expenses, the e-commerce giant announced on Thursday. 
• The company also announced the forthcoming launch of the EBay Vault, a storage facility and digital marketplace for trading cards and other collectibles. The vault will launch in the U.S. next quarter and will soon secure luxury goods as well, the company said.
• The company expects the EBay Vault to secure up to $3 billion in assets over the next few years, which could make it one of the largest warehouses of non-governmental assets globally, per the press release.

Dive Insight:

With the EBay Vault, the veteran e-commerce platform is building upon its previous efforts to foster more trust in its marketplace.

In October 2020, the company announced that it would enlist third-party experts to authenticate shoes sold for more than $100 as part of an authenticity guarantee initiative. Later that month, it also announced its Certified Refurbished program, which showcased items in "like new" condition that had been cleaned, inspected and refurbished by their manufacturer.

The online marketplace operator has devoted resources toward authenticating not just sneakers but also luxury watches and sports memorabilia. Last April, the company began hosting in-person events to verify the authenticity of collectibles in Atlanta, Seattle and other major cities. It acquired Sneaker Con Digital's authentication division in November.

EBay's new digital wallet offering is part of an effort to expand its payment capabilities, which also includes new features like allowing users to receive payouts on demand or on a schedule, per its investor day infographic. EBay currently boasts 147 million active buyers.

"Over the past two years, we have fundamentally changed the trajectory of our marketplace. We have demonstrated we can improve customer satisfaction, accelerate our growth, help sellers thrive and attract and retain enthusiast buyers," Jamie Iannone, CEO of EBay, said in a statement. "We are building an EBay for the future by doubling down on what we do best — connecting sellers and buyers of non-new in-season products."

As it executes on a transformation, EBay last year also hired former Walmart digital advertising executive Stefanie Jay to serve as its chief business and strategy officer, which involves managing the strategy, business operations, analytics and communications teams at the company.

Though EBay and other marketplaces have dedicated resources to vetting merchandise sold on their platforms, marketplaces are still a focus point for those combating counterfeits. A host of retailers have called for greater transparency around e-commerce marketplaces and their sellers.

Twenty retailers, including Target, Nordstrom and Neiman Marcus, wrote a letter to members of Congress in December asking them to pass the "Integrity Notification and Fairness in Online Retail Marketplaces" Consumers Act, legislation that would require online marketplaces to disclose more seller information to shoppers and verify the identity of high-volume sellers. The retailers said that the law would disincentivize the sale of stolen goods on online marketplaces. After initial opposition, EBay also endorsed the bill, along with some other e-commerce marketplaces.

Dive Brief:

• Physical gift cards are still preferred by slightly more than half (54%) of consumers, according to a new study published this week from payments company Fiserv, despite the rise of digital cards. That's similar to data from a 2019 study which also showed physical gift cards were favored by both purchasers and receivers, although more of those giving than receiving had a preference for the tangible card.
• But just as the COVID-19 pandemic has sped up broader payments innovation, it’s fueled the rise of digital gift cards: Over the last two years, 48% of consumers polled said they’ve bought more digital gift cards than physical ones. The 2019 study had found 53% of consumers had purchased physical gift cards, compared to 27% who bought digital ones.
• About 37% have stored a gift card on a mobile app, and one-third load gift cards they receive into their mobile wallets, Fiserv's new study found. Consumer awareness of storing gift cards on mobile apps has grown: 51% know they have this option, compared to only 25% who said this in 2019.

Dive Insight:

Most consumers told Fiserv the COVID-19 pandemic didn’t affect their gift card purchasing habits, and the Brookfield, Wisconsin-based payments giant said the prevalence of digital purchase and delivery has kept the gift card market steady over the past two years.

Egged on by the pandemic and the shift to faster, contactless payments, more consumers have turned to mobile wallets to make purchases. The Federal Reserve has said some of these pandemic-induced changes in payments could be here to stay. Based on the increases Fiserv discovered, that appears likely to apply to the gift card market, too.

Those who favor digital gift cards appreciate immediate delivery (77%), that they’re easier to send (62%) and easier to purchase (50%). Traditionalists who opt for physical gift cards prefer them as a tangible gift (61%), that the recipient has something to unwrap (46%) and ease of giving and use (39%), per Fiserv, which handles gift card services for thousands of merchants.

With nearly half of consumers turning to digital gift cards over physical ones during the pandemic, Fiserv’s study noted the recent rise of innovations related to e-gift cards, like scheduled delivery and the ability to customize gift cards with personal photos. About 55% are interested in a gift card that can be used at any local restaurant, and 35% want to see a mobile platform where all gift cards can be stored. 

In 2019, just 12% of consumers had received a gift card by text; that jumped to 28% in 2021. Similarly, only 10% of consumers purchased a gift card through a merchant’s app in 2019, and that grew to 25% in 2021, Fiserv found.

Most consumers – about 70% – primarily purchase gift cards for others, with holidays and special events being the most popular giving occasions. But nearly 20% of consumers are buying gift cards for their own use, with more reporting benefits like discounts received by purchasing gift cards (45% in 2021, up from 35% in 2019), loyalty or rewards offerings (44% in 2021, compared to 30% in 2019) and to shop online (32% in 2021, up from 25% in 2019).

Almost three-quarters of consumers prefer buying single merchant gift cards. More than half (53%) of consumers buy gift cards from online-only merchants like Amazon, 49% buy from discount or big-box stores and 41% pick up gift cards at coffee shops.

Merchants may notice other benefits to digital gift cards, too. In the restaurant sector, consumers spend more when buying digital gift cards than physical ones, according to a recent study by restaurant software company Paytronix, per PYMNTS. The bad news from that study is that restaurant gift card sales haven't recovered to pre-pandemic levels despite edging up last year.

About 1,000 consumers took part in Fiserv’s 19th annual Prepaid Consumer Insights Survey in December 2021.

Expect buy now-pay later to be a juggernaut in payments for years to come.

That's according to the 156-page 2022 Global Payments Report released March 2 by the Worldpay unit of Fidelity National Information Services, also known as FIS. Buy now-pay later (BNPL) will account for about $438 billion, or 5.3%, of the global e-commerce transaction value by 2025, up from 2.9%, or $157 billion, in 2021, fueled by strong demand in key markets such as North America and Europe.

BNPL transactions accounted for 3.8% of the value of North American e-commerce sales in 2021, compared with 1.6% a year earlier, according to the report. In Europe, BNPL accounted for 8.1% of the continent's e-commerce transaction value, per the report from Jacksonville, Florida-based FIS.

The value of U.S. e-commerce transactions rose 10% between 2020 and 2021, while Canada showed a 13% gain during that same time. FIS estimated North American e-commerce transactions value will grow at an average 11% compound annual growth rate through 2025, when it will reach $2.3 trillion.

"Dozens of BNPL firms compete in the U.S. market that is projected to represent upwards of 9% share (nearly US$180 billion) by 2025, including Affirm, Afterpay, Klarna, PayPal Credit, Sezzle and Zip," the report said. "Europe continues to lead in the use of BNPL at the point-of-sale, accounting for 1.9 percent of in-store payments in 2021."

FIS expects BNPL to be the fastest-growing e-commerce payment method through 2025 in the U.S. and Canada as well as in Brazil, Hong Kong, India, and the U.K., among other markets.

Concerns linger about BNPL's surging popularity. Consumer Financial Protection Bureau Director Rohit Chopra on Dec. 16 issued a series of orders to Affirm, Afterpay, Klarna, PayPal and Zip, requiring those BNPL firms to provide information about their business practices.

The CFPB pressed BNPL providers for details on whether operators have followed consumer protection laws. The agency also asked about data harvesting conducted by providers, some of which have created shopping apps with partner merchants. Chopra also raised concerns about the level of debt consumers are taking on in BNPL transactions.

Affirm and Klarna said they met a March 1 deadline set by the CFPB to comply with the order. The other companies targeted by the bureau haven't publicly indicate last week whether they handed in their paperwork late.

Some consumer activists including the Center for Responsible Lending have also raised concerns about BNPL services, which are popular with young consumers. In addition, a group of six Democratic senators urged the CFPB in December to investigate the industry.

Consumers took to BNPL and other services like digital wallets during the COVID-19 pandemic, and show no signs of abandoning them, the report said. The FIS forecast predicted digital wallets will account for around one-third of North American e-commerce spending by 2025.

"Even as more customers return to the store, it is clear that there is no going back on the innovations we are seeing within fintech," Jim Johnson, head of merchant solutions at FIS, said in a press release. 

"Consumers are now mirroring the way they shop online while they are at their favorite retailer – creating a more advanced blend of digital and physical payment options than we saw prior to the pandemic. The implications of this are significant for merchants, who now need to innovate and partner with a technology provider who can help them meet the diverse needs of modern-day consumers," Johnson said, per the release.