Trends to watch in payments in 2023
Tien-Tsin Huang: We still see the same two big themes in payments playing out. Number one, software is taking over payments. And the second one is that everyone wants to bank their users.
Most of the companies are really good at doing just one or the other, meaning just serving consumers, or just serving merchants. But for those handful of companies that have building relationships with both, if they can connect the ecosystems, there's a host of opportunities for them to provide value-added services to have higher retention, to have better LTV.
And as a result, you should see better growth. We're starting to see e-commerce growth pick up, credit debit spend has been a lot more predictable. The challenge is that there are some signs of the consumer getting a little bit weaker. And so that's a macro issue. But there is history to draw parallels against that. And the further we move away from the pandemic, I feel more confident that the predictability of growth will be easier in '23 versus the last two years.
A niche opportunity we're watching and payments is in vertical-specific software, companies that go very deep in a vertical, and dominate it with an operating system, and trying to own that market. We're starting to see in restaurant, in retail, education, names cropping up and delivering outsized growth. So we like that market.
Another one I'd say is the B2B space. B2B is still underpenetrated. It's three times larger than the consumer-to-business space and with better software, better platforms, and better bank distribution. We feel good about the outlook for payments. We know there's a lot of concern over the macro, and the consumer, and how healthy businesses are, et cetera. But the secular outlook for payments is undeniable.
There's a lot of investment and innovation both on the consumer and the merchant side. We're going to see better experiences both on the digital and face-to-face world. So we think the payment names can overcome some of the macro and get back to being viewed as defensive growth.
[MUSIC PLAYING]