The global digital payment industry is expected to reach USD6.6 trillion in 2021, representing a 40% increase in just two years. Innovative cashless payment methods such as mobile wallets, peer-to-peer (P2P) mobile payments, real-time payments, and cryptocurrencies are rapidly evolving. Many payment technology companies are collaborating with traditional financial institutions to meet the latest consumer and merchant preferences in the digital age. Because of improved broadband connectivity, increased mobile commerce, the emergence of new technologies such as Virtual Reality, Artificial Intelligence, and rapid digitization, billions of people in both developed and developing countries have begun to embrace contactless payments. Furthermore, growing e-commerce, digital remittances, digital business payments, and mobile B2B payments are boosting the non-cash transaction ecosystem.
Cashless transaction method users of all ages are increasingly turning to digital peer-to-peer (P2P) apps because they are more appealing and flexible to use. In-app payments, also known as tap-and-go transactions, allow users to make payments whenever and wherever they want. Tokenization, encryption, Secure Sockets Layer (SSL), and other technologies provide a variety of methods for securing payments while enabling digital transactions. Furthermore, users do not have to enter information each time they make a payment. Thus, online payment gateways play an important role in economic growth by facilitating trade in the modern economy. With social distancing rules in place, digital payments have become a requirement for contactless transactions rather than just a transaction alternative to prevent coronavirus spread.
Businesses are being empowered by digital commerce.
As consumer preference for online shopping grows, electronic payment systems have become an essential component of businesses. With increased internet penetration, increased smartphone use, and a variety of e-commerce options, most consumers prefer online channels to traditional brick-and-mortar stores for shopping. As a result, businesses are shifting online with an electronic payment solution in order to maximize profit earnings. Automating the electronic payment system reduces the possibility of errors and saves a significant amount of time and effort. Users are protected from security breaches by high standards for detecting and preventing fraud in digital transaction systems, as well as AI-based fraud detections. Businesses can expand their customer base by allowing them to make payments using credit/debit cards, mobile money, e-Wallets, and other methods. Customers are more satisfied with electronic payments because they do not have to count cash or deal with paperwork whenever they want to make a transaction.
Biometric Authentication Improves Security
Recognizing biometric features and structural characteristics to verify an individual's identification is what biometric authentication is all about. Fingerprint scanning, facial recognition, voice recognition, vein mapping, iris detection, and heartbeat analysis are all possible verification methods. With the rise in identity theft and fraud, biometric authentication has emerged as a dependable and secure method of conducting digital transactions. According to a recent study, biometrically verified mobile commerce transactions will account for 57% of all biometric transactions by 2023. Biometric payment cards are also gaining popularity because they support tap-and-go payments, allowing users to complete digital transactions more quickly. Worldline, a provider of digital payment technology, is collaborating with A3BC (Anything Anywhere Anytime Biometric Connection), a French FinTech, to secure mobile phones with a two-factor authentication process. The combined solution does not recognize fingerprints through a single touch, but rather through a picture of the hand. MasterCard intends to introduce FinGo's vein-scanning payment solution, which allows users to authenticate transactions.
Mobile Wallet Dominance
In 2019, mobile wallets surpassed credit cards as the most widely used payment method worldwide. Users can use digital wallets to store multiple payment methods in one digital home and convert cash into electronic money for online or in-store purchases. Financial institutions have already begun to embrace the digital wallet trend by providing business customers with virtual cards. Virtual cards stored in digital wallets include information such as a 16-digit card number, CVV code, and expiry date, and function similarly to physical plastic cards. Only 37% of merchants currently accept mobile payments at the point of sale, but with rising adoption, merchants are willing to invest in technologies that enable digital wallets. Because they limit transaction values and frequency, virtual wallets can help you save money. Artificial Intelligence (AI) is improving the user experience in transactions with ChatBots, which are designed to execute and robotize essential exchanges based on the user's preferences. Furthermore, cryptographic money-based e-wallets are being adopted for storing digital money by new companies to small-medium organizations. Since Amazon pioneered the principle of this platform, which is now being followed by Google and Apple, smart voice technology has contributed to the growth of smart voice wallets.
The e-commerce boom is hastening the growth of the digital payment market.
E-commerce growth is creating shock waves, and the sonic boom is reverberating throughout the FinTech sector. Many e-commerce companies' growth is fueled by the financial services they offer. Digital transactions make it easier for buyers and sellers to transact while remaining loyal to the market space. The COVID-19 pandemic added a new dimension to e-commerce innovation, ushering in newer trends such as payment alternatives at checkout (rather than digital wallets), virtual cards, QR codes, and other touchless transactions. Furthermore, the Buy Now Pay Later (BNPL) trend is dominating the e-commerce industry because it relieves the buyer's financial burden. BNPL uses a soft credit check, allowing customers to buy what they need, keep inventory moving, and pay over time without negatively impacting their credit score. BNPL provides much-needed liquidity and flexibility at the checkout for businesses.
The Impact of the COVID-19 Pandemic on the Growth of the Digital Payment Market
Beyond peer-to-peer (P2P) transfers and bill payments, digital payment systems have evolved. The COVID-19 pandemic provided an opportunity for digital payment systems to demonstrate their strengths, such as a deep understanding of hyper-local markets and the ability to form strong local partnerships. Businesses and consumers are increasingly """"going digital"""" when it comes to offering and purchasing goods and services online. People did not want to touch or exchange cash during the pandemic because they were afraid of contracting the disease from physical currency. To provide COVID assistance, several governments around the world implemented digital financial transfers. Consumers shifted to online platforms as a result of lockdown measures, driving up demand for digital payment systems. Digital platforms have now become an essential part of people's lives, and consumers are more likely to continue shopping online after the pandemic. The dramatic shift in consumer behavior is likely to drive even more demand for e-payment systems. As a result, businesses are focusing their attention on digital mediums in order to meet new customer demands and thrive in a changing market scenario. Companies are redesigning customer journeys to reduce friction and introduce new security features. Payment companies like PayPal and Square Cash are hiring across the board in order to better understand the shift in societal norms and stabilize the business in the near future.
e-payment systems are the way of the future.
Consumers are becoming more tech-savvy as smartphone and internet penetration rises, creating limitless opportunities for the digital payment markets. Digital payment systems are expected to thrive in the years following the pandemic. While cards continue to be the preferred method of payment around the world, mobile wallets are quickly gaining traction. Traditional cash flow in bank branches and ATMs is declining, indicating a power shift toward a cashless society. Currently, China dominates the global mobile wallet consumption, followed by South Korea. However, there are still many countries that are highly dependent on cash due to lack of trust towards financial institutions and lack of proper broadband infrastructure, etc. In the near future, social media-initiated payments, biometric payments, voice-activated payments are likely to become mainstream in developing countries as well.
Cybersecurity and Privacy Concerns with Online Payment Solutions
Cybersecurity and privacy threats have become a troubling concern with the increasing incidences of online fraud. According to the Mastercard survey, one out of four consumers experienced some kind of fraud in 2020, ramping up the cybercrime rate by 49%. In the first half of 2020, online scams increased by 73.8% from 2019. However, adopting new-age technologies such as multifactor authentication, biometrics, 3D security, Artificial Intelligence, and Machine Learning can help control fraudulent activities such as phishing, virus attacks, etc. Shifting to contactless cards, QR codes, and tokenization can also help mitigate risks associated with digital payment solutions. Besides, sensitizing end-users about the secure application of e-payment solutions through amplifying efforts towards building financial literacy can help to prevent frauds. The emergence of mobile commerce and the evolution of e-payment platforms backed by robust security solutions can help to drive the goal of making the economy truly cash-less."""
