The global digital payment market is undergoing a massive transformation. The total market value was $56.43 billion in the year 2020 and is expected to reach $178.8 billion by the end of 2026.
Post COVID-19, there has been an unprecedented growth in the use of digital payments. The e-commerce industry flourished as more medium and small-scale businesses started adopting digital payments as an essential tool for accepting payments. Complete lockdowns were announced and people worldwide had to rely on digital payments for their day-to-day expenses.
The demand for digital or cashless payments was always there even before the pandemic hit us. Smartphones penetrated the global economy even in the remote parts of villages. The advent of mobile wallets revolutionized digital payments. Mobile wallets allows users to make instant payments without using real cash, credit, or debit cards.
Top Payment Trends of the Next Decade
The digital payment landscape is evolving. Here, in this article, we are going to look into the latest trends in digital payments in the upcoming years.
1. IoT Payment Solutions
Imagine you went to a restaurant to grab a quick lunch and as you walk through the door, you get a notification that your bill has been automatically paid. Here is another situation: you want to watch a movie with your friend and your smart assistant books the movie tickets all by itself. This is a seamless IoT payment solution. So, what is IoT?
IoT or Internet of Things is a wireless network of interrelated things or devices that have been embedded with chips, and sensors that allow us to transfer and store data without any intervention of humans. IoP or Internet of Payments is a part of the IoT ecosystem.
IoP Solution Benefits:
IoP can accelerate contact-less payments especially during times of social distancing.
Gives personalized solutions and does not expose your credit card or bank details.
The automotive industry is where you can refuel your cars, make in-car payments for parking tickets, or book movie tickets using IoP payments.
Smart homes for delivery of utilities, rent payments, buying products, etc.
FinTech industry by collaborating with financial institutions and banks can give a major advantage to the traditional banking system.
2. Omnichannel Payments
Omnichannel payments are smart comprehensive payment solutions for businesses and retailers. It combines multiple payment solutions under one common platform that helps businesses to perform seamless transactions with their customers.
Consumer behavior has evolved and so has their expectations. Customers share big chunks of data through mobile payments, cards, or digital wallets. Omnichannel payment solutions unify these data and pass on valuable information to retailers who get a clear view of the individual shopper.
Benefits of Omnichannel include:
Provides crucial information for understanding customer behavior and gives them an improved personalized experience. Leverages brand recognition and loyalty by providing good quality products and consistent customer service.
Reduces the cost of B2B (business-to-business) transactions by using one integrated payment solution instead of multiple systems.
Simplifies work functions like monitoring stock levels or overall sales, accounting, marketing activities, etc.
Eliminates redundant fees. Simplifies processing by reducing the manual entry of data and paperwork.
3. Contactless Payments
The COVID-19 pandemic has magnified the need for contactless payments. Social distancing has been the need of the hour and during these hard times, contactless payments seem to be the only logical solution.
Contactless payments are based on NFC (Near Field Communication) technology which works on RFID (Radio Frequency Identification). When a customer reaches a POS (point-of-sale) terminal, the NFC connects and exchanges data to process a transaction. The whole process can be done through contactless cards or NFC payment cards. NFC cards are debit or credit cards enabled with an NFC chip. A smartphone with NFC technology can also be used for contactless transactions.
Benefits of Contactless Payments include:
Speedy transactions. It takes hardly 10 to 15 seconds to complete an NFC transaction.
Security. No requirement to enter PIN codes. Before each transaction, a unique code number is generated which is practically impossible to hack. The user simply has to tap the card on the reader and the transaction will be automated. In case of loss or theft of your card, the bank can be notified to freeze the account.
Confidentiality. Account details or cardholder name is not shared during transactions.
Improves customer experience. No need to carry cash. No verification is needed during transactions.
Increase revenues. Banks can introduce value-added features to attract customers that give them an added advantage over their competitors.
4. Digital Currencies
Digital currencies are digital money that exists in electronic forms. They are not tangible assets like fiat currencies (dollar bills, coins). A huge volume of banking transactions is based on digital currencies. Banks hold only a portion of physical money and most of the other banking functions like investing or trading are done with digital money.
Cryptocurrency is a type of digital currency that operates on blockchain technology. They are unregulated and are not governed by any central authority like banks.
Digital Currency Benefits include:
Fast, cross-border transactions without exposing credit card or personal details.
Low transaction fees. Crypto coins like bitcoins charge much lower fees compared to credit cards.
Wire transfers may take time. Banks generally do not operate during weekends. Digital currencies can be done any time of the day.
No tax regulations on crypto transactions.
The payment industry is evolving. People have become more tech-savvy as new and innovative technologies are shaping up the financial market. The pandemic further disrupted the financial ecosystem and accelerated the need for contactless transactions or digital payments.
According to the latest reports, around 78% of the consumers worldwide shifted to digital payments during the lockdowns in 2020 contributing to more than $4.6 trillion transactions in the global e-commerce industry. In India alone, the figure was INR 2,153 trillion by the end of 2020 were more than 800 million Indians have opted for mobile digital payments.
Digital payment is convenient but we also cannot ignore the associated risks of spammers and hackers. Companies are advocating the use of advanced security measures like biometric authentication, facial recognition, or eye scan for safe transactions.