Closed-loop payments will be launched in the UK and US this year

By Puja Sharma

Demand for alternative payment solutions – whether in the form of instant account-to-account payments or platform-specific closed-loop solutions – is coming at a time when traditional card payments are under increasing scrutiny from regulators.

Closed-loop and account-to-account services are top of the list for payment firms in 2022. Over half of US and UK companies planning to launch a closed-loop payment system this year. Closed-loop payment systems are top of the alternative payment product wish list as over half of the payment teams in the UK and US look to launch their own in 2022. Account to Account (A2A) payments at the point of sale (POS) is the second most popular with just under half planning to launch a product by the end of the year, according to research by regulatory intelligence specialists, VIXIO.

The 2022 Payments Compliance Outlook report is based on research conducted late last year with 113 (56 UK, 57 US) compliance professionals who work at FinTech and payments firms with $10m+ in revenues. It found that 52% plan to launch a closed-loop payment product in 2022 and 61% will develop one by the end of 2023.

It also found that 45 percent plan to launch an A2A product for POS payments in 2022 and 53% will launch one by 2023. In addition, a sizeable number are planning to launch e-wallets and digital currencies, with 41 percent of financial services and payment functions planning to focus on these products in the next two years.

Demand for alternative payment solutions – whether in the form of instant account-to-account payments or platform-specific closed-loop solutions – is coming at a time when traditional card payments are under increasing scrutiny from regulators. The rise of Open Banking arrangements provides payment firms new opportunities to innovate and compete for customer attention. This is supported by payment modernization initiatives such as the proposed New Payments Architecture in the UK or the new FedNow instant payment service due to launch in 2023.

Andrew Neeson, Research Director at VIXIO, said: “Brands must innovate and chase growth opportunities in the face of a rapidly evolving regulatory landscape, and alternative payment solutions can play an important part in this. Firms are aware of the benefits of offering faster, efficient, and frictionless user experiences that many alternative payment methods offer, and so are understandably keen to include them in their arsenal.”

New product launches have been at the heart of the compliance team’s priorities with the data also showing that 87% of compliance departments increased headcount over the last two years. The biggest reason for doing so is a need to focus on strategic licensing decisions (18%).

Furthermore, supporting the licensing process for new products is the highest priority for payments compliance teams in 2022 (16%).

 “For innovation and new alternative payment product launches to be a success, compliance needs to be on your side. Compliance departments are an enabler of growth.” Neeson added.

In addition to the 2022 Payments Compliance Outlook report, VIXIO is upgrading its Horizon Scanning platform to cover 60 countries by April 2022. The tool helps businesses track regulations and monitors regulatory bodies across multiple jurisdictions and languages.