The financial system in Portugal, and in particular the means of payment, will be conditioned by four major trends.
Predicting the future may be an inglorious exercise, especially given the current context of uncertainty and the rapid transformations we witness every day. However, it is undeniable that these new trends that are having a profound impact on the way consumers relate to businesses and also on the way these agents (individuals and organizations) relate with financial institutions.
A new model of payment systems – supported by more convenient digital solutions – is gaining ground. Companies that do not understand these changes risk being left behind and losing their competitive edge. The more traditional financial entities – that do not incorporate these innovations – risk losing relevance and market share.
I believe that the financial system in Portugal, and in particular the means of payment, will be conditioned by 4 major trends.
1. New credit instruments are emerging in online commerce
The rapid growth of e-commerce over the past years has given a new dynamic to payment methods worldwide and has led to the adoption of new solutions that not only bring greater convenience for consumers, but also enhance the business of companies. Buy Now, Pay Later (BNPL) is an example of this trend. It is both a payment solution and an online financing solution.
With this tool, consumer credit is being transported to the digital world, with the advantage that the credit approval process is done quickly and with very low interest rates. According to some forecasts, by 2025 BNPL will have a penetration rate above 40% in online purchases made by Generation Z and Millennials.
2. Growth of MB Way and implementation of WhatsApp payments
The future of payment systems is shaped, on the one hand, by the development of new technological solutions and also by the emergence of new consumer habits – especially for the younger generations. In this context, payment methods that provide an enjoyable shopping experience, that are fast, flexible, and easy to use, will gain ground.
Therefore, it is expected that the weight of transactions made through MB Way will continue to grow and gain importance over Multibanco references and bank cards. Following the same line of thought, other payment methods also connected to smartphones – such as Apple Pay, Google Pay, or even payments made using WhatsApp – also have a great growth potential.
3. The “appetite” for cryptocurrencies will continue
All over the world, companies are interested in receiving payments in cryptocurrencies – and Portugal is no exception. Private digital currencies are here to stay. Even among regulators, there is a new understanding of the relevance of the revolutionary role that digital currencies are playing in the global payment system.
In the next years, we will certainly see further developments on this topic: it is possible that more central banks will implement pilot projects to create CBDC (Central Bank Digital Currencies) and that European consumers will be able to experiment and test digital currencies.
4. New players entering the digital financial services arena
Revolut launched its bank in Portugal late in 2021. Sonae is also launching a set of digital financial services for small businesses, through Universo Negócios. These examples prove how favorable the digital financial services ecosystem is in Portugal.
For the players that are now arriving, the big challenge is to develop solutions that are really differentiating and present advantages attractive enough for consumers and companies to feel that it is worth switching.
In the case of traditional banking, there will have to be an effort to adapt to this new environment and accelerate innovation in their organizations. As economist Daniel Bessa once said in a debate: “Those who don’t innovate, leave the scene”.