The digital payment revolution and the future
By Shubham Munde, Senior Research Analyst, Market Research Future
The digital payment revolution is reshaping the global economy and renovating the way transactions, such as buying and selling goods and services. With the emergence of innovative technologies, digital payments have become a key driver of economic growth and development. Today, cutting-edge payment technology offers exceptional levels of convenience, security, and efficiency. Digital payment is the fastest-growing industry that has attracted more investment than any other financial services sector. The sector has delivered the highest returns and growth in the past decade. The rapid growth of the digital ecosystem has been driven by key factors such as the government’s push towards digitalization, an increase in internet and smartphone penetration, and the rise of e-commerce.
The penetration of digital payments among consumers has been surging at a skyrocketing speed. The percentage of consumers using digital payments increased significantly from 51.10% in 2021 to 62.47% in 2022 and continue to grow in the coming years. In 40 countries, 85% of people used at least one emerging digital payment method, such as BNPL, eWallets, real-time payments, crypto, etc. Online purchases and digital commerce will drive this growth. The growing demand for contactless payments has led merchants to incorporate Tap to Pay on iPhone and mobile wallets like Cash App, Google Pay, and Apple Pay into their POS software. The payments industry has undergone significant changes recently, with the Asia-Pacific region and China leading the way. This growth is expected to continue, with new and redesigned business models disrupting the market and forcing existing players to adapt.
The payment landscape is rapidly changing, with a wave of cashless innovation on the rise. Almost nine out of ten Americans now use some digital payment, and they interact with these constantly expanding solutions in an increasing number of ways. In-app and peer-to-peer (P2P) purchases show the largest gains, often building on the existing use of online payments, which remains the most popular digital use case, with 69 percent of consumers using it. Singapore has the area’s largest number of digital costs per person, with an average of 831 digital payments every year. Singapore’s e-commerce business is bolstered by high-speed and dependable internet access and a young and tech-savvy populace. Sweden is predicted to become a cashless nation in 2023. E-commerce expenditure accounts for around 6% of South Korea’s GDP as a leading proponent of a cashless society. Despite fewer annual transactions, India’s overall volume of cashless payments increased by 48% yearly. Unified Payments Interface (UPI) has accelerated India’s shift to non-cash payments, specifically P2P fund transfers and low-value merchant (P2M) payments.
Significant technical advancements will play an important role in defining the future as transactions increase. Smartphone biometric security features have increased digital payment transactions. By 2030, 200 million blockchain wallet users are expected. Bank of America and Visa are both actively investing in peer-to-peer partnerships. Recognition of faces In China, QR codes may soon be phased out of retail, public transportation, and airports.
In 2023, there will be specific digital payment developments. Biometric authentication is a rapidly rising concept in the year 2023. With the increased gamble of identity theft and fraud, biometric authentication may become a trustworthy and safe option for all digital payments in 2023. Another trend is the tech-savvy generation known as Gen Z. In 2023, there will be about 2 billion Gen-Z people worldwide. This population transition will have far-reaching consequences. Because of this trend, the world’s population in 2023 will be tech-savvy.
This generation will rely more on advanced, automated, faster, and more efficient technology and services. As a result, demand for digital payment systems is expected to skyrocket in the following year. Payments for smart speakers are another example. Many giants have invested in the production of smart speakers. 35% of consumers use smart speakers to purchase home care, food, and apparel.
Contactless payments are another payment option that will see substantial growth in 2023. Many companies, including Samsung, Apple, and Google, already have contactless payment systems. Mobile wallets may also have a stronghold. By 2025, it is expected that there will be 4.87 billion mobile wallet users. And the numbers are increasing all the time.
Along with the numerous benefits of digital payment, there are also drawbacks. The development of digital payments is hastening online payment fraud. Payment fraud threats targeted 71% of global organizations in 2021. Furthermore, the rate of digital payment fraud is increasing. Global merchant losses due to online payment theft will top USD 343 billion between 2023 and 2027. Machine learning (ML) emerged as the most formidable opponent for battling payment fraud.
Omnichannel digital payments have increased over time, but it has declined from an all-time high of 58 percent in 2020. The COVID-19 outbreak appears to be causing some alterations in digital adoption. Covid-19 and its ramifications represent a massive potential for the FinTech sector. Covid-19 has had a terrible effect on the financial system, but it also presents itself as an accelerating force for digital payments, showing the crisis’s overwhelming pervasiveness.
Today digital payment has gained rapid adoption across various industry vertical such as BFSI, IT & Telecommunication, Retail & E-commerce, Hospitality, Healthcare, Media & Entertainment, and Others. Many banks worldwide are attempting to form alliances with digital payment service providers to give real-time payment options to consumers and merchants. Yes Bank, for example, announced a relationship with Amazon Pay and Amazon Web Services (AWS) in November 2021 to provide a real-time payment system via the Unified Payment Interface (UPI) transaction capability. UPI supports inter-bank person-to-merchant and peer-to-peer network transactions via the Yes Bank digital payment platform because of this agreement. The growing number of online transactions in the e-commerce and retail sector worldwide can be attributed to the industry expansion. Furthermore, the ever-increasing demand for online commerce is likely to boost the development of the digital payment industry.
According to Market Research Future, “the global digital payment market was valued at USD 84.47 billion in 2022 and is expected to grow from USD 97.15 billion in 2023 to USD 259.25 billion by 2030 with a CAGR rate of 15.1% during 2023-2030”. Artificial intelligence (AI) application has recently become a primary emphasis for digital payment platforms. Several payment companies have recognized that utilizing AI for payments can result in considerable benefits. As a result, more payment processors are incorporating artificial intelligence into their operations to increase comprehension, speed up transactions, and strengthen security measures. Because of the industry’s substantial potential in developed and emerging economies, the market will likely generate massive income opportunities for market participants throughout the projected timeframe. Countries like the US, China, Japan, the UK, Germany, India, and Canada currently dominate the Digital Payment market worldwide.
However, as artificial intelligence progresses, we may see the rise of digital payment. With the assistance of AI, the payments industry would be able to manage a massive volume of transactions while minimizing errors and fraudulent activity. This cutting-edge technology will undoubtedly play an essential role in the industry’s future. To stay relevant, banks and card networks must redefine the payments experience through digital payment offerings, create personalized connections with customers through best-in-class customer service, and collaborate pragmatically with other banks and fintech to unlock previously untapped revenue streams. With digital payments becoming more prevalent in most economies worldwide, new opportunities such as real-time B2B payments and cross-border digital payments are rapidly emerging. By carefully positioning themselves and capitalizing on their core strengths, incumbents may provide competitive and compelling payment solutions and prosper in this new payment landscape. Millennials and Gen Z consumers are also familiar with and use digital payments frequently. Merchants will only retain significant business if they accept digital payments.