FIS’ recent 2022 Global Payments Report found that BNPL accounted for 8.1% of Europe’s regional e-commerce transaction value in 2021, more than twice the share of North America’s 3.8%.

Digital wallets in Spain accounted for 30.3% in 2021, overtaking credit cards as the leading regional e-commerce payment method. Digital wallets, credit cards, and BNPL are all increasing in Spain, as debit cards, bank transfer and cash on delivery (COD) are expected to decline through to 2025.

The report also notes that e-commerce in Europe will continue to shift toward alternative payment methods and away from cards, with digital wallets leading e-commerce payment methods accounting for 26.7% of transaction value in 2021.

Research from Juniper echoes this finding, and predicts that digital wallet users will exceed 4.4 billion globally by 2025, as mobile drives digital payments revolution.

Source: FIS

However, these significant changes can’t be addressed in isolation, and as digital platforms continue to bridge customers with their financial institutions, fintechs, payment service providers, and banks must all grapple with new forms of financial, operational, and reputational interdependencies.

Part of this process will come down to new regulatory frameworks which seek to rectify fragmented or non-integrated value chains, platforms and the unbundling of financial services.

For instance, clarity around the EU’s Digital Finance Strategy will emerge during 2022, helping financial institutions and fintechs to tailor their products and services in line with new regulatory requirements.

Regulators themselves are also beginning to provide technical advice to the EU Commission on how to future-proof the financial services ecosystem, which is targeted at tackling regulatory fragmentation across EU member states. The European Banking Authority, European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority’s joint response to the European Commission’s 2021 call for comment on digital finance is a clear example of this, particularly with regard to the impact of PSD2, distributed ledger technology, and open finance, across European payments.

The focus of the technical advice will be on understanding the regulatory direction on the regulation and supervision of: (i) fragmented value chains (in particular the increasingly fragmented merchant-facing payments value chain), (ii) platform business models and (iii) mixed-activity groups (for example, big tech’s experimentation in financial services).

With digitisation in full swing and new technology readily available, payment service providers will need to adapt their customer journeys around a digital operating model. Further, traditional banks should consider looking to neo and challenger banks for inspiration and guidance, particularly when it comes to personalisation of customer offerings.

Advancements across digital payments will be a key point of discussion throughout Finextra and the Euro Banking Association’s highly anticipated EBAday 2022, held on the 31st of May and the 1st of June in Vienna, Austria.