According to Accenture, over $48 trillion in transactions will shift from cash to digital payments in the coming decades. At the same time, global payments revenues are likely to increase by an average of 8.3% and will reach $2.3 trillion by 2026.
According to fintech expert Sergey Kondratenko, this transition to digital payments highlights the need to constantly improve the payment infrastructure. He notes that these dynamics are driving demand for contactless payment methods, open banking, digital wallets and other payment trends. The specialist suggests considering which ones below.
Sergey Kondratenko is a recognized specialist in a wide range of e-commerce services with experience for many years. Now, Sergey is the owner and leader of a group of companies engaged not only in different segments of e-commerce, but also successfully operating in different jurisdictions, represented on all continents of the world. The main goal is to drive new traffic, create and deliver an online experience that will endear users to the brand, and turn visitors into customers while maximizing overall profitability of the online business.
Review of current payment trends and consumers of the new digital generation
Sergey Kondratenko characterizes the situation in the global payments market as follows: “At first, there was rapid growth due to the emergence of new players and a decrease in the income of companies involved in digital payments. Then there was a slowdown due to limited financial market performance.”
Addressing statistics, the expert states that from 2019 to 2021, new providers of digital payment solutions increased their income by 68%. From 2021-2023, this growth was 19% per year. Existing fintech companies that provide payment services continue to grow steadily at 10% per year.
New payment service providers are now competing head to head with traditional finance. However, Sergey Kondratenko believes that this will not last long:
“Financial institutions still need to improve the experience to retain their customers, while payments startups and large enterprises will have to work to increase profits and expand their product portfolio to maintain high growth rates. The expert suggests that tradition and innovation will soon reach a balance through cooperation.”
Financial institutions must continually evolve primarily due to the increasing diversification of payment methods among consumers.
According to information from Mastercard 85% of people in 40 countries have already used at least one of the new digital payment methods – e-wallet, instant payment, cryptocurrency, etc. Another 93% have expressed their intention to try one of these new payment methods in the coming year.
Modern clients, as Sergey Kondratenko notes, are striving for more convenient ways to make digital payments and want to speed up and optimize this process. Here’s what the expert says they should expect when switching to digital:
- Mobility. Customers prefer to have one mobile wallet or card that allows them to make various transactions and purchases.
- Convenience. Online retailers have created high standards for digital payment convenience, including one-click, invisible payment. In the physical world, there is also an expectation of ease of interaction with various devices to make transactions.
- Safety. More and more consumers are unhappy with the use of usernames and passwords for security. They would prefer biometrics as a secure and convenient payment method.
To achieve long-term profits, companies will have to consider more than just new customer preferences. They also need to provide more convenient ways to use different payment options to retain their customer base.
Sergey Kondratenko: Modern trends in digital payments: contactless transactions
The expert identifies the following trends that contactless payment platforms should take into account:
- Variety of contactless options. Contactless payment volumes are growing steadily and are projected to continue to do so over the next 5-8 years. Forecast Juniper Research suggests that global contactless payments will exceed $10 trillion by 2027, up from $4.6 trillion in 2022. Consumers increasingly expect contactless options at both checkout and mobile points of sale. The lack of contactless options is becoming a barrier for customers in retail stores and restaurants.
- Technological development.Sergey Kondratenko is convinced that following global trends, organizations should update EMV software. The technical barriers to the growth of contactless technology have been largely removed. Chains, issuers and merchants are ready to implement contactless payments.
- Contactless smart cards. These cards provide a variety of functions, including payment, personal data storage, authentication for access to various services and replacement of transport cards. They are a “digital wallet” in physical form with a secure microprocessor (chip). ISO/IEC 7810 ID-1 and ISO/IEC 7816 security standards govern smart contactless cards.
- Growth of the global smart card market. Financial analysts expect The global smart card market will reach $11.5 billion by 2025. Various applications of smart cards are being explored, including public transport, access to amenities, tourism and e-government services.
Sergey Kondratenko: Mobile payments in global financial geography
Mobile wallets and digital payments continue to gain popularity, and the number of contactless transactions is increasing every day. Consumers are increasingly using their smartphones instead of bank cards. Forecasts say that by 2025 the volume of payments through mobile wallets will reach $120 trillion with an annual growth rate of 19.9%. In 2026, digital wallets will be used by 60% of the world’s population.
The rise in demand for mobile payments is prompting many merchants to include Tap to Pay for iPhone and mobile wallets such as Cash App, Google Pay and Apple Pay in their POS systems.
A particularly strong spread of digital wallets is observed in the markets of developing countries (India, Brazil and others), notes Sergey Kondratenko. Here, limited access to traditional banking services is leading to the rise in popularity of mobile wallets issued by telecommunications companies. For example, in Africa, more than 621 million consumers already use such wallets, and the continent contributed 70% to the $1 trillion global value of mobile money.
Governments and banks, according to the expert, also realize the importance of overseeing the development of payment infrastructure. In Asia, financial institutions predominantly target a young and technologically savvy population, which is why they prefer to implement digital wallets instead of traditional bank accounts. For example, Thailand’s PromptPay system, created by the local central bank, has attracted more than 56 million users in a country of 71 million.
In turn, the European Commission is working on new rules and frameworks for the implementation of digital personal identification. This could significantly impact the development of digital payments. The European Payments Initiative (EPI), created by the European Mobile Payment Systems Association (EMPSA), aims to create a pan-European digital wallet.
“If digital IDs and the digital euro become widespread, it will lead to increased interoperability between digital wallets, banks and financial services. Financial institutions will be able to conduct faster and more efficient KYC/AML checks using data from digital IDs and other customer-related accounts,” suggests Sergey Kondratenko.
The expert draws attention to the fact that these trends are forming a new payment ecosystem. Financial institutions need to monitor and adapt to remain competitive and meet customer expectations.