The days when people would rely on cash and cheques to make payments seem like a lifetime ago, thanks to the advent of mobiles and computers which have drastically changed how we deal with financial activities
The continuously evolving technologies have contributed to the introduction of innovative services like e-commerce that have necessitated the demand for rapid payment systems.
Despite this, traditional means of payment have failed to catch up and spectacularly failed to meet the demand for faster payments methods, thus leading to the growth of groundbreaking digital payment systems.
Increased proliferation of e-commerce and adoption of mobile devices are two of the reasons for the fast-tracked growth of digital payments.
Causes of hastened growth of digital payment
In addition to the two reasons above, the growth of digital payment systems has been powered by the following factors.
Changing customer expectations and preferences
The convenience and speed of online shopping and e-commerce have changed customer expectations when it comes to the immediacy of the payment experience.
In the modern world, consumers expect faster services across the board, and this indebtedness for time-saving has extended rapidly to the payment world. To meet this demand new payment methods popped up in recent years among them cryptocurrency stands out. Cryptocurrency is virtual money created by computing software and used for everyday purchases and transactions like fiat currency. Like traditional credit cards, crypto cardholders also earn cashback from each purchase, which is stored on a digital wallet instead of a bank account. However, crypto credit card rewards accumulate in cryptocurrency, unlike regular credit cards. Due to the partnerships with major credit card issuers, such as Visa or MasterCard, crypto cardholders can use your crypto rewards anywhere, that service is accepted.
Adoption of new technologies
New technologies as well as the adaptation of current technology have offered new approaches to the payment experience.
Smartphone technology has provided consumers with an expanding range of services via mobile applications. These apps have allowed payments for virtually everything, from hotel and taxi bookings and giving rapid, secure payments via mobile banking.
Today, digital payment is the main driver for the thriving of the global economy, with the increasing user base of mobile, smartphones, e-commerce, and internet banking.
Basically, digital payments are gearing towards being cashless, faceless, and completely via electronic means of end-to-end operation without affecting traceability, availability, and provenance as well as repudiation and information security.
In the past decade, digital payment systems have generated lots of interest and user adoption has influenced the digital strategy for governments and enterprises.
According to a report by Gartner:
- Global cash circulation will significantly reduce by 2024 after years of year-on-year growth
- Five countries are expected to launch digital initiatives that will lead to the elimination of cash from circulation and replace it with digital cash by 2023.
- Customers using mobile proximity methods of payments will reach 2 billion by 2021 from less than 1 billion in 2019.
In India alone has seen digital payments reach a record high in 2020 and according to a report by the European Central Bank, the total number of digital payments in Europe increased to 98 billion in 2019, an 8.1% increase from the previous year, with up to 162.1 trillion euros and digital payments accounted for up to 48%.
Europe has a more advanced and matured digital payments sector, and the customary cash system is now declining in ATMs and bank branches, demonstrating further Europe’s shift from cash.
What to Expect Next?
While we discuss how digital payments have changed the industry so far, it is also important to keep an eye on the future.
Thanks to Covid-19, a large number of people across the world made their first-ever online purchase, with over 13 million Visa users making payments for the first time between January and March 2021. This is in part due to the changing consumer preferences as well as due to established e-commerce systems.
Vigorous digital growth makes alternative payments a robust segment for consumer demographics that are ever-developing as well as an attraction for new merchant competitors.
So what does the future of digital payment holds:
Use of speech/voice analytics & AI-based algorithms
These have been around for several years now and are driving the way we interact with our home appliances as well as how we interact while driving.
But as these technologies become more and more accurate, the digital payments sector is expected to leverage them in real life, helping create a safer and simple way of transacting and trading within the digital payment field.
Using facial recognition and fingerprints, digital payments can be made possible through authenticating users as well as authorizing the transactions, providing accurate, secure, and instant methods, instead of remembering multiple passwords and PINs from different entities.
Most digital payment institutions use the power of device-based authentications and tokenization of transactions without user interventions.
Last but not least, Digital Ledgers on Blockchain are finding new ways of striking a balance between digital payments and autonomous currencies, which are highly decentralized, business continuity driven, and anti-fraud.