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5 Innovations Shaping the Digital Payments Industry

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Customer using phone to make a payment with credit card


Advancements in digital payments technologies have transformed the way people make financial transactions. Easily made with a click of a mouse or a tap of a finger, they are now a part of consumers’ day-to-day lives. For consumers, digital payments have made tasks like shopping, paying bills, and transferring money more convenient, efficient, secure, and accessible. At the global level, the technology behind digital payments has helped facilitate cross-border business for companies and more robust financial opportunities for people in developing economies.

With the digital payments market projected to reach US$9.46T in 2023,1 it is clear that payment methods matter to consumers. Merchants have many payments solutions to offer and the key to building a successful digital payments strategy is understanding what is driving their popularity and the potential ways consumers can use them.


 

1. Digital wallets

By 2026, an estimated 5.2B people will use digital wallets to make payments worldwide—more than half of the world’s population.2 There is good reason for this technology’s surge. Digital wallets not only simplify and expedite the payment process, they also store consumers’ credit and debit card information on mobile devices, such as a phone or watch, and they encrypt and protect that information to make using the device a secure way to make purchases.

Digital wallets frequently come in the form of an app that allows consumers to link multiple payment methods, including debit and credit cards. When making a purchase with a retailer that accepts the app, consumers can then choose which card they want to use.

Complicated checkout processes can be a roadblock in the customer journey, and digital wallets provide significant potential benefits for merchants looking to create a seamless shopping experience. In 2022, the online average for cart abandonment was 70%, with customers reporting complicated checkout processes as the reason they decided against a purchase.3 Digital wallets streamline checkout, providing highly desirable, frictionless transactions, and supporting higher conversion rates and lower cart abandonment rates.


2. IoT and connected commerce

The Internet of Things (IoT) has expanded the payment acceptance network to include smartphones, connected cars, smart home devices, and wearables.​​ Embraced by fitness-conscious consumers, wearable devices are contributing to a growing demand for cashless payments, and interest in using other networked devices is on the rise, with 56% of consumers saying they are interested in making payments through a connected car and 57% interested in making payments through a smart home device.4

72% of consumers believe that wearable payment devices are the future of in-store shopping.5 Merchants who are prepared to adapt to the ways consumers use connected commerce will be in a position to improve their overall customer experience and shoppers’ evolving expectations for frictionless checkouts


3. Instant cross-border payments

Instant cross-border payments make it possible for merchants and consumers to experience frictionless, real-time payments via connected financial institutions in two or more countries. Popular for their speed, cost-effectiveness, and transparency, the demand for instant cross-border payments is growing.

Globally, there is a growing need for faster and more efficient cross-border payments. The United Nations estimates that 800 million people receive remittances,6  which is money sent from people in developed economies to family and friends in the developing world to pay for things like food, utilities, and education. Global B2B cross-border remittances are close to $150T, making the speed and ease of these payments important to business owners and merchants, too.7

Central banks are considering the possibility of issuing their own central bank digital currencies (CBDC) specifically designed to execute cross-border payments more efficiently.7 CBDCs have the potential to cut cross-border remittance costs by 50% while making funds available in seconds instead of days.8


4. Peer-to-peer (P2P)​ payments

The use of P2P payments is becoming more widespread because of their ability to quickly transfer funds from one account to another with minimal or no fees. These payments can be processed in just hours and sometimes even instantly, making it possible for customers and businesses to transfer money for products and invoices automatically.

By minimizing delays in payments processing, P2P payments have the potential to improve merchants' cash flow. P2P payment methods also verify sensitive customer data, such as names, bank or credit card numbers, and other critical information, making these transactions a secure option for both buyers and sellers. This level of security, along with speed, may be one reason a September 2022 market report estimated that the global P2P market will reach $9,135B (USD) by 2030.9


5. B2B payments systems

While the rise in digital payments has been driven mainly by consumer demand, the B2B segment of the market is not far behind. Digital payments technologies present new ways for businesses to process transactions, move money, and offer services similar to consumer payments experiences.

Merchants now have access to payment services that are cost-efficient, digital-first, integrated, and fast, with comprehensive and holistic services that include:

  • Full-service automation. This includes automated payments, invoicing, and subscription billing.
  • System-wide security. Payments systems can now maintain security across the entire payment process, including fraud prevention, transaction monitoring, and compliance.
  • Streamlined payments functions. Look for optimized processes, including payment checkout, payment orchestration, and monetization.
  • Interdepartmental functionality. The latest payments systems can be integrated across departments and platforms.
  • Real-time tracking capabilities. This covers inventory tracking, sales reporting, and customer data management.


Putting technology to work for merchants

The current payments landscape is full of solutions that can help merchants optimize their operations and their sales. Your payments provider can help you determine which solutions are right for your customers and your business.


 

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  1. Statista. Digital Payments - Worldwide. Viewed 20th October 2023 from https://www.statista.com/outlook/dmo/fintech/digital-payments/worldwide

  2. Juniper Research. (2022, August 22.) Digital Wallet Users to Exceed 5.2 Billion Globally by 2026, as Digitisation Accelerates Cashless Transition. Viewed 20th October 2023 from https://www.juniperresearch.com/press/digital-wallet-users-exceed-5bn-globally-2026
  3. Baymard Institute. 49 Cart Abandonment Rate Statistics 2023. Viewed 20th October 2023 from https://baymard.com/lists/cart-abandonment-rate
  4. Discover Global Network. (2023, July 5) Unlocking new value through digital payment experiences. Viewed 20th October 2023 from https://insights.discoverglobalnetwork.com/insights/unlocking-value-through-new-digital-payment-experiences
  5. Grand View Research. Wearable Payments Devices Market Size, Share & Trends Analysis Report By Device Type (Fitness Tracker, Smart Watches), By Technology, By Application, By Region, And Segment Forecasts, 2021 - 2028. Viewed 20th October 2023 from https://www.grandviewresearch.com/industry-analysis/wearable-payments-devices-market
  6. United Nations Department of Economic and Social Affairs. (2019, June 17) Remittances matter: 8 facts you don’t know about the money migrants send back home. Viewed 20th October 2023 from https://www.un.org/development/desa/en/news/population/remittances-matter.html#:~:text=Currently%2C%20about%20one%20billion%20people,who%20have%20migrated%20for%20work
  7. Global Payments. 2023 Commerce and Payment Trends Report. Viewed 20th October 2023 from https://www.globalpayments.com/commerce-payment-trends
  8. Vantage Market Research. (2022, May 4.) Digital Remittance Market - Global Industry Assessment and Forecast. Viewed 20th October 2023 from https://www.vantagemarketresearch.com/industry-report/digital-remittance-market-1522

  9. Spherical Insights. (2022, October) Global Virtual Cards Market Size, Share, and COVID-19 Impact Analysis. Viewed 20th October 2023 from https://www.sphericalinsights.com/reports/virtual-cards-market


 

The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.