The most important digital payment trends in Switzerland in 2023
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2022 was another turbulent year. The Covid pandemic continued to ripple on, the Russian-Ukrainian war broke out, the energy and commodities crisis came to a head, inflation skyrocketed and consumer spending plummeted. The consequences of all this - and more - were felt in online retail: the boom caused by the lockdowns was over.
And yet this year has also taught us a lot, perhaps even more than we think. The difficult times have made e-commerce more resilient: companies have become more flexible in order to remain competitive. And the future of payment is definitely digital.
In this article, the Swiss online payment service provider Payrexx explains current and future trends that will shape and influence digital payment transactions in Switzerland in 2023. Online merchants should keep an eye on these.
Trend 1: Mobile payment and wallets are becoming the new standard
Paying by smartphone is becoming increasingly popular and by 2023 most customers will make their payments using mobile payment applications such as Apple Pay, Google Pay, Paypal (mainly e-commerce in Switzerland), TWINT and Samsung Pay.
These applications offer a convenient and secure way to make payments and are becoming increasingly important, particularly in the field of e-commerce. The use of NFC technology (Near Field Communication, or NFC for short, is a short-range wireless technology that enables devices to communicate with each other when they are within a short distance of around ten centimetres of each other) and QR codes allows customers to make contactless payments quickly and easily using smartphones or wearables. It will be essential for companies to offer these payment options.
Trend 2: Growth of QR code-based payment
QR code-based payment has become increasingly established in recent years and will play an important role in digital payment transactions in 2023.
First of all, it is important to understand how QR code-based payment works. QR codes are two-dimensional barcodes that can be scanned using a smartphone camera. Once the QR code has been scanned, the user is automatically redirected to a payment page where they can complete the payment. This simple and convenient payment method offers many advantages for both customers and companies. For customers, it means they don't need a special payment card or hardware to make a payment. They can simply use their smartphone to scan the QR code and complete the payment. For businesses, the growth of QR code-based payment means that they can offer their customers a quick and convenient payment method without having to install special hardware or payment terminals. This can be particularly beneficial for smaller businesses that cannot afford the cost of installing payment terminals.
One example of the growth of QR code-based payment is the Chinese online retailer Alibaba, which uses QR codes to provide its customers with a simple and convenient payment system. In Switzerland, QR codes are primarily known in connection with TWINT and the new Swiss QR-bill. Payrexx has developed a simple QR code solution for SMEs that supports not only TWINT, but all relevant payment methods in Switzerland.
Trend 3: Increase in "buy now, pay later" (BNPL) payments, both online and in-store
"Buy now, pay later" (BNPL) is a payment method that allows customers to make their purchases immediately but postpone payment to a later date.
BNPL has gained popularity in recent years and has become a trend in digital payments worldwide. One of the main reasons for the growing popularity of BNPL is that it is particularly attractive to younger consumers who may have limited financial resources and find it difficult to pay for large purchases in one go. In addition, payment is very flexible and secure.
Finally, the COVID-19 pandemic has contributed to BNPL becoming a trend, as many people have become more cautious about spending money due to economic uncertainties and restrictions on physical purchases and are looking for alternative payment options such as BNPL that allow them to make their purchases without having to come up with all the money at once.
In fact, the trend could also establish itself permanently in Switzerland as an attractive solution for the younger generations. The advantages for consumers include:
Payment only necessary after receipt and inspection of the goods. Refunds to the end customer are therefore often not necessary.
Larger purchases are also possible without prior savings.
Processing via the payment service providers' apps is intuitive and secure.
However, there are also disadvantages and risks that anyone wishing to make future purchases with deferred payment should be aware of:
Additional fees for late payment
Credit limit often not transparent
Payment term not always adjustable
According to the Online Merchant Survey 2022 - a study by the E-Commerce Lab at Zurich University of Applied Sciences (ZHAW), two thirds of merchants who offer BNPL see the main advantages in attracting additional customers through a wider range of payment methods, as well as the higher conversion rate, greater loyalty of existing customers and the constant availability of this payment method.
Ivan Schmid, CEO and founder of Payrexx, assumes that BNPL will also become established in the retail and B2B sectors, as more and more business processes are being digitized and it also enables companies (especially young start-ups) to improve their cash flow situation by postponing the payment of purchases to a later date.
In Switzerland, the following BNPL providers are primarily known: Klarna, bob Finance, MF Group, SwissBilling, Byjuno and Ideal Payment. The offerings from bob Finance, SwissBilling and Ideal Payment are available with Payrexx. In 2023, a number of new providers such as BNPL from TWINT (in partnership with SwissBilling) and others will give the topic a boost.
Trend 4: Biometric authentication is becoming the standard
The use of biometric authentication methods such as facial recognition, voice analysis and fingerprint scanning will continue to increase and by 2023 many companies will rely on these technologies to verify user accounts and make payments more secure. The use of biometric data can prevent fraud and identity theft. Example: The online retailer Amazon already enables its customers to make a purchase directly using facial recognition.
Version 2 of 3-D Secure also uses biometric authentication in a new approach based on a broader range of data. 3-D Secure is a security protocol for online payments that was developed by the major credit card companies. It serves to increase the security of online purchases by introducing an additional security level that is interposed with every online purchase.
Trend 5: Increase in instant payment solutions
The use of instant payment solutions will continue to increase and the technology will become a preferred payment method for many customers and companies. Instant payment solutions enable payments to be made in real time and offer a fast and convenient alternative to traditional payment methods such as bank transfers.
By using instant payment solutions, payments can be processed within a few seconds and are therefore ideal for fast transactions, such as when purchasing products in the e-commerce sector. Another advantage of instant payment solutions is their high level of security. By using encrypted data transmissions and modern authentication methods such as biometric technologies, payments using instant payment solutions are very secure.
In the area of instant payment, Switzerland is still lagging far behind internationally. Nevertheless, there are a number of projects and efforts to develop and promote instant payment standards. More and more banks are already offering P2P payments in real time. Yapeal, for example. Payrexx will also offer a Swiss instant payment solution for the e-commerce sector in cooperation with banks.
Trend 6: Growth of fintech companies
The number of fintech companies offering innovative payment solutions will continue to grow and these companies will also play an important role in digital payments in 2023. Their focus on customer needs and their advanced technologies will make them an alternative to traditional banks.
There will therefore be greater cooperation between online payment providers and traditional financial service providers.
"The payment sector is on course for growth, partly because small and medium-sized enterprises, public institutions and merchants want to integrate payment and financing options into their processes"
said PwC fundraising expert Sherin Maruhn in an interview with the news agency Reuters at the end of December 2022. Source: Cash article from December 18, 2022
Trend 7: Spread of wearable payment technologies
The use of wearable payment technologies, such as smartwatches and fitness trackers that can be used as a means of payment, is steadily increasing. These technologies enable users to make payments easily and conveniently via their wearable device by holding their device up to a payment terminal or authorizing their payment via a corresponding app. One example of such wearable payment technology is the Apple Watch. The Apple Watch can be connected to the iPhone and allows users to make payments via the Apple Pay app. Users can add their credit or debit card and then make payments in stores, restaurants or online by holding their Apple Watch to the terminal or authorizing it via the app.
Another example is Garmin Pay (headquartered in Schaffhausen) - a payment function that is available on most Garmin fitness trackers. Users can add their credit or debit card and then make payments in stores or online by holding their Garmin watch to the terminal or authorizing their payment via the Garmin app. The proliferation of wearable payment technologies provides users with a convenient and secure way to make payments. These technologies also allow users to leave their physical wallets at home and still make payments, which can be especially beneficial for athletes and people on the go.
Trend 8: Increased focus on security
In the digital payment sector, a focus on security is becoming increasingly important as more and more people shop and make payments online. The increasing use of technologies such as mobile payments and online banking also increases the risk of cyber attacks and data misuse.
To ensure the security of transactions and personal information, it is important to use secure payment methods and secure online payment providers and to carry out regular security updates. The introduction of regulations and compliance standards also helps to improve security in the area of digital payments.
The PCI-DSS (Payment Card Industry Data Security Standard) Level-1 is an internationally recognized security standard developed by the Payment Card Industry Security Standards Council (PCI SSC). It defines how companies must handle credit and debit cards securely in order to minimize the risk of data breaches and misuse. The PCI-DSS Level 1 standard is considered the highest level of security and sets strict requirements for the management of security measures and the protection of sensitive customer data. Companies that meet the PCI-DSS Level 1 standard can ensure that they offer their customers a secure payment process and protection of their personal data. The payment provider Payrexx fulfills the latest PCI-DSS Level-1 standards at the highest security level every year.
Trend 9: Virtual credit cards
A virtual credit card is a type of electronic payment method that makes it possible to make online purchases without having a physical credit card. It is created via an online account (usually via a smartphone app) with a credit card company or bank and can then be used for online payments. In addition to traditional credit cards, there are also prepaid credit cards and debit cards (Debit Mastercard, Visa Debit) as virtual cards.
Virtual credit cards usually have a limited validity and a fixed amount that can be used for payments. They are more secure than conventional credit cards as they cannot be stolen or lost and no personal information needs to be provided in order to use them.
The use of virtual credit cards will increase as they offer a simple and secure way to pay for online purchases. Important advantages of virtual credit cards are:
Flexibility: Virtual credit cards can be easily created and deactivated, making it easier to manage and control them.
Easy to set up: There is no paperwork or waiting time to get a virtual credit card as it can be set up online.
International usability: Virtual credit cards are accepted worldwide and can easily be used for online purchases and payments abroad.
Anonymity: Virtual credit cards make it possible to make payments anonymously, as no personal information needs to be provided.
Find out more now about accepting virtual credit cards with Payrexx. A good overview of providers for consumers can be found at Moneyland .
Trend 10: Growing popularity of P2P payment services and platforms
Platforms that allow users to make payments directly to each other will continue to grow in popularity for the following reasons:
Convenience: P2P payment platforms allow users to send and receive payments directly from their smartphones or computers without the need for cash or checks.
Security: P2P payment platforms often use security assumptions such as encryption and secure authentication to protect users' financial information.
Widespread acceptance: Many P2P payment platforms are widely accepted and used by many people, making it easy to send and receive payments from others.
Cost: P2P payment platforms can be more cost-effective compared to traditional payment methods, as they often have lower or no fees.
Social payments allow users to donate money and send and receive money to friends and family directly via social networks such as Facebook and Instagram or payment services such as TWINT, Paypal or, increasingly, via neon banking apps.
This type of payment is likely to become even more important in the future, especially among younger users.
Trend 11: Omnichannel payments
More and more customers are making purchases across different channels and devices. Omnichannel payments allow businesses to make their payment options available for all channels, improving ease of use and customer satisfaction. They also make it easier for customers to make payments whether they are shopping online or in a store and allow payments to be tracked and managed across different devices. Omnichannel payments therefore help to improve the customer experience and strengthen customer loyalty.
Trend 12: Increasing use of blockchain technology for micropayments
In recent years, the use of cryptocurrencies such as Bitcoin, Ethereum and Litecoin as a means of payment, especially for micropayments, has become increasingly widespread and this trend will continue in 2023.
In light of current events, it is easy to forget that the crypto industry has continued to develop strongly in recent months, despite the market turbulence. With The Merge, the Ethereum ecosystem has seen a significant technological advancement that will improve the scalability and mass adoption of the Ethereum blockchain.
Blockchain technology has the potential to be used as the new standard for micropayments, as it enables fast, secure and cost-effective transactions. With Centi Payment Services(Centi Ltd), there is an interesting project in Switzerland that enables micropayments in real time and at almost no cost.
Central bank digital currencies (CBDC) on the rise
CBDC (Central Bank Digital Currency) are digital currencies issued by central banks. They are often seen as a possible alternative to conventional currencies and could play an important role in digital payments in the future.
There are several reasons why CBDCs can be seen as a future opportunity in the field of digital payments. First of all, they are faster and cheaper than traditional payment methods as they can be transferred directly between two parties without the need for intermediaries. They can also serve as a means to promote financial inclusion by providing access to financial services for people without bank accounts or with poor credit ratings.
However, there are also some challenges that need to be considered when introducing CBDCs. There are privacy concerns, for example, as central banks may have access to financial transactions carried out with CBDCs. There are also issues in the context of regulation and dealing with cyber risks.
Worldwide, there are two major megatrends (the transparency megatrend and the globalization megatrend) that are driving digital change. Nobody can defend themselves against these trends - they are the "flow of history" of our society. In view of this and the fact that new CBDC projects are published every day, the Swiss National Bank (SNB), as an innovative national bank in Central Europe, must keep pace.
Although SNB Governing Board member Andrea Maechler said on January 18, 2022 at an online financial conference at Goethe University in Frankfurt that the SNB has rejected a central bank digital currency (CBDC) for private individuals for widespread use in everyday transactions because it believes that the risks outweigh the benefits, we at Payrexx are convinced that a digital franc will be introduced in the foreseeable future.
Further information on this topic:
Conclusion
Overall, 2023 will be an exciting year for the digital payment industry, with numerous new developments and innovations. We can look forward to seeing what new products and technologies the industry can expect in the coming months.
Disclaimer: The opinions expressed in this article on trends in the digital payment market reflect the personal opinions of the experts at Payrexx AG and may not be complete or accurate.
Create your own successes with Payrexx
Payrexx offers a simple and convenient payment solution that allows your customers to easily choose their preferred payment method, as well as an optimized checkout to increase your conversion rate.
As one of the fastest growing payment service providers in the German-speaking world, we have made it our mission to provide our customers with the tools they need to achieve greater success in e-commerce. With Payrexx, you can expect advanced security functions, all major payment methods such as TWINT, Mastercard, VISA, PostFinance, Apple Pay, Google Pay, Samsung Pay, Paypal and QR-bill from a single source. An intuitive dashboard with integrated e-commerce tools, as well as personal assistance and support for all phases of your business.
Find out more now about secure online payments with Payrexx.
