The CEO of Spreedly anticipates that 2024 could become the year of the micro-wallet
According to Spreedly CEO Justin Benson in a recent interview with Karen Webster, 2023 has been characterized as a year of retrenchment in the payments industry. As interest rates have risen and early-stage funding has become scarce, both startups and larger companies are grappling with existential challenges, considering consolidations, and reassessing their strategies. Benson pointed out that payment providers are likely to witness waves of consolidation or attrition, depending on their areas of focus, as top-line growth slows down and efforts are concentrated on cost containment and optimization.
However, he also emphasized that some positive trends from 2023 are likely to endure. Local and alternative payment methods, providing consumers with diverse choices, still hold potential for revenue growth as merchants expand into new markets. Service providers that can enhance reliability, authorization rates, and in-country processing capabilities are well-positioned, with network tokens gaining increased adoption. Benson noted that many of Spreedly's customers are concentrating on their core strengths, doubling down on their unique attributes, and aiming to offer value-added services amid what he referred to as the "great reset."
Looking ahead to 2024, Benson predicted that it might be the year of the micro-wallet. Merchants are creating their own marketplaces and ecosystems, knitting together various activities to form new business models that require new fund flows. He cited Shopify Pay as an example, where digital wallets deeply integrate into the eCommerce ecosystem, allowing consumers to maintain balances as they shop with different merchants. Benson suggested that, beyond industry giants like Apple Pay and Google Pay, there's an opportunity to create branded wallets with value, provided they are distinct and excel in their specific verticals. These wallets could tap into the potential of millions of consumers with funds to spend within a closed loop of commerce, offering significant opportunities for merchants and providers.
Regarding what lies ahead for 2024, Benson anticipated growth in account-to-account transactions, even though it is still in its early stages. He pointed out the ongoing friction between push and pull models, where pull transactions assume that the account has available funds. Nevertheless, he believes there will be a growing preference for recurring, relatively lower-value transactions by both consumers and merchants.
Regardless of the transaction type, Benson stressed the increasing importance of payment orchestration. With interchange rates under pressure, merchants need to find ways to reduce transaction costs. Intelligent routing can enable merchants, including direct-to-consumer businesses, to access multiple providers through a single integration point and benefit from improved authorization rates. Many of these platforms, initially catering to smaller businesses, are now targeting larger enterprises. The traditional PayFac model of handling payments in-house is no longer sufficient, and orchestrators like Spreedly can simplify the payment process. Benson concluded that scalability is crucial, especially as online marketplaces continue to expand.
