Mastercard’s 2022 outlook defined by a return to the experience economy
- Mastercard Economics Institute’s Economy 2022 global outlook report highlights five fundamental factors that will continue to shape the global economy for most organizations next year
- The five fundamentals are savings and spending; supply chains; digital acceleration; travel; and a growing list of economic risks
For consumers, participation in the digital economy will depend greatly on how products are presented to them. Hence, organizations have been investing more to improve the digital experience within the e-commerce industry.
The so-called experience economy is all about having that seamless approach to digital platforms. From browsing products to payments on e-Commerce apps, the past 24 months have already seen huge changes among e-commerce providers as the buying power moves virtually due to the Covid-19 pandemic.
And it’s not surprising that consumers are demanding better experiences today. However as 2022 approaches, there are lingering concerns on everything from inflation and supply chain chaos to the reopening of the global economy, and the shift back to buying more services.
Despite this, the potential for consumer spending to uplift global GDP growth is still a strong likelihood, as is the return of global tourism as travel restrictions are lifted and governments forge ahead with plans to re-open, armed with the learnings of the past two years.
According to Mastercard Economics Institute’s Economy 2022 global outlook report, five fundamental factors will continue to shape the global economy with consumer experience and digital resilience making the priorities for most organizations next year. The factors are savings and spending, supply chains, digital acceleration, travel, and a growing list of economic risks.
For travel, Mastercard’s report predicts an uptick in leisure travel recovery as international travel opens up, with medium and long-haul flights to gain ground in 2022. However, the economy and experience of travel will solely heavily on the handling outcome of the Omicron variant, which has already caused a dent in some international travel arrangements.
Globally, consumer spending of their built-up savings could contribute an additional three percentage points to global GDP growth in 2022, as pandemic restrictions ease. In the US, there is about US$3.69 left to spend in excess savings in a slow scenario, whereby there will be a return to gradual spending habits in three years.
Digital economy experience to grow in 2022
Meanwhile, the 20% digital shift in retail is expected to stay put. E-commerce subscriptions gained traction in 2021 as nearly 88% of countries across 32 markets saw a surge in subscription services compared to the previous year – on average, retail subscription share of total spend increased by a factor of 1.25 from 2020, to 2021 across 6 Asia Pacific markets.
Notably car companies, virtual workout partners, bike rentals, and pet services are among the slew of businesses benefitting from this model. Cloud-based computing and storage have been key enablers for the subscription economy’s growth, resulting in a rising number of new businesses and consumer interest.
Moreover, in countries like the US, there has been ongoing strengthening e-commerce growth. Mastercard SpendingPulse, which measures overall retail sales across all payment types including cash and check, states that US e-commerce sales increased 9.4% year-over-year in November 2021.
For supply chains, global household spending on services is expected to accelerate while demand for goods also stays robust in 2022. Whilst supply chain disruptions continue to linger on, prolonging high logistics costs and a surge in global commodity prices, exports remain a major positive factor for the region.
Lastly, risks remain with the potential to disrupt the global economy. New COVID variants like Omicron pose the biggest immediate risk, however there are additional risks identified that have the potential to derail economic recovery — including a sharp recalibration of housing prices, a surge in oil prices, and fiscal cliffs in advanced economies.
“Whilst the recovery trend across the region may be non-linear, we anticipate pent-up demand and savings will finally be released by consumers, evidenced by the recovery of ‘out-and-about’ categories such as apparel and beauty,” said David Mann, Mastercard AP & MEA Chief Economist. “The continued strength in e-commerce, and pandemic categories such as home improvements and hobbies will also be bolstered by a steady rise in the subscription economy, painting a positive picture despite the lingering threats of new variants, inflation, and supply chain disruption.”