Was 2021 the year of the new normal? Looking back at 2020, the world has been shaken by global events that made pre-covid era seem unattainable ever again. However, since 2021, a transition to a new type of normal has been emerging and allowed individuals and companies to reinvent themselves.

Indeed, digital developments are increasing consistently, and the pace of change in the APAC and MENA regions brings many angles under focus. Regions have individual cashless initiatives in train, and collaboration between financial institutions, telcos, FinTech's, digital finance start-ups and policymakers have been unprecedented. Thereby, the payments industry has shown a remarkable growth due to the digitalisation phenomenon that is taking place and the new dynamics and innovations emerging to adapt to the “new normal”.

During these last 12 months, we have seen three main changes in the payment industry:

1.    The global digital acceleration of the payment industry:

Heading into 2022, several ongoing trends in the payments landscape have emerged, notably, there has been a considerable rise in contactless payments and the use of virtual cards. Indeed, card payment has become a primary focus of innovation in digital banking transformation. The last two years have seen everyone, from Apple to Facebook, attempting to enter the market.

Concerning the APAC region, according to "The next wave in payment technology" whitepaper, its payments industry has outpaced all the other regions over the past decade. This region is also one of the largest contributors to global payments revenue, generating approximately $630 billion in 2020.

On the other hand, the MENA region is also taking advantage of this new market opportunity as major banks have launched digital banks that operate in sync with their conventional retail divisions. For instance, National Bank of Kuwait (NBK) in 2020 launched its digital account opening service. Abu-Dhabi based Al Hilal Bank is set to launch its Islamic digital financial services platform in the fourth quarter of 2021.

Moreover, as seen on the Aite-Novarica Group and HPS paper: multiple other digital innovations of the payment industry are also taking over. A great one is Mobile money and how it has changed the face of Africa. This innovation along with a Mobile Money Interoperability model are creating new pathways to an improved standard of living across the continent. A good example is the Mobile Money Interoperability (MMI) initiative in Ghana.

As a result, banks and financial institutions are facing multiple challenges in term of digital innovation in order to satisfy the demand. However, one main solution remains:  partnerships and collaborative approaches with FinTech's and technology solution providers, to leverage the latest technologies for modernising their payment platforms.

2.    Transition from cash to digitalised payments:

Market dynamics and infrastructure vary greatly per country and region, but the direction of innovation and change is converging on the same outcome: digitalisation and cashlessness.

According to HPS study with Finextra, reasons for the transition away from cash and towards digital include enabling connection between unbanked consumers, merchants and services through mobile money; greater visibility and view on liquidity for merchants; reduction in fraud and crime by implementing a digital trace; the rising proliferation of smartphones; internet penetration; the adoption of modernised technology and the ongoing COVID-19 pandemic that has further accelerated the adoption of digital modes of payments.

As a result, while cash payments have traditionally dominated the Middle East region, there has been a steady shift towards digital payments as end customers expect this mode to be more flexible, simple, efficient, customer centric and instant. As seen on the “Building a future ready payment platform” whitepaper, the Middle East digital payments market is expected to register an estimated CAGR of 5-6% for the period 2021 - 2025.

That being said, HPS collaborative study with OMDIA showed that digital payments will continue to take share from plastic cards with digital wallets increasingly being adopted. New payment methods such as buy now, pay later, account-to-account and QR payments are becoming mainstream as well as the emergence of cryptocurrencies and central bank digital currencies.

3.    The remarkable growth of e-commerce:

Additionally, the transition from traditional modes of payment to new digital solutions and the need for technological innovation in the payment industry is also explained by the unprecedented growth that has experienced e-commerce. As many know, this shift has accelerated the need for financial organisations to adapt to new consumer demands and payments innovations.

Moreover, as stated by OMDIA, COVID-19 has accelerated consumer demand for online shopping as many new, mainly small, businesses traded online for the first time. E-commerce increased in importance for more than two-thirds of retailers, particularly for those forced to shut stores during lockdown.

Consequently, digital expectations will continue to change at a rapid rate and a modern issuing platform is essential to provide the capability to easily build new products/services and rapidly deploy at scale, to ensure issuers can keep pace with consumers’ demands.