The cashless payment system is growing exponentially with evolving payment methods, the growing use of e-commerce, improved broadband connectivity and the emergence of new technologies. Can the growing incidence of cyber attacks and spam hinder the growth of the online payments market or will it continue to grow rapidly?
The global digital payments industry is expected to reach the $ 6.6 trillion mark in 2021, recording about a 40% jump in two years. Cashless payment methods are evolving rapidly with revolutionary innovations such as mobile wallets, peer-to-peer (P2P) mobile payments, real-time payments and cryptocurrencies. In the growing digital age, many payment technology companies are working with traditional financial institutions to take care of the latest preferences of consumers and merchants. Thanks to improved broadband connectivity, increased mobile commerce, the emergence of new technologies such as virtual reality, artificial intelligence and rapid digitalisation, billions of people have begun to accept contactless payments in both developed and developing countries. In addition, growing companies for e-commerce, digital money transfers, digital business payments and mobile B2B payments are stimulating the ecosystem of cashless transactions.
Users of cashless transactions of different generations widely accept digital peer-to-peer (P2P) applications because they are more attractive and flexible to use. In-app payments or touch and move transactions take seconds to make payments and allow users to make payments anytime, anywhere. Tokenization, encryption, Secure Sockets Layer (SSL), etc., offer many ways to secure payments while allowing digital transactions. In addition, users do not have to fill in information every time to complete the payment process. Thus, online payment portals play a crucial role in economic growth, enabling trade in today’s economy. With the rules of social distancing, digital payments have become an obligation for contactless transactions, not just an alternative to transactions to prevent the spread of coronavirus.
Digital commerce that enables business
Electronic payment systems have become a crucial part of the business as consumers’ propensity to shop online expands. With the expansion of Internet penetration, the growing use of smartphones and the variety of e-transaction options, most consumers prefer online channels to traditional shopping stores. That’s why companies go online with an electronic payment solution to maximize their profits. The automation of the electronic payment system eliminates the range of errors and saves significant time and effort. High standards for fraud detection and prevention in digital transaction systems and artificial intelligence based fraud detection protect users from security breaches. By providing the flexibility to make payments via credit / debit cards, mobile money, e-wallet, etc., businesses can expand their customer base. The electronic payment process improves customer satisfaction, as customers do not have to count cash or deal with documents when they want to make a transaction.
Biometric authentication to increase security
Biometric authentication involves the recognition of biometric features and structural features to verify a person’s identification. The verification method may include fingerprint scanning, facial recognition, voice recognition, vein mapping, iris detection, and heart rate analysis. With the rise of identity theft and fraud, biometric authentication has become a reliable and secure alternative to digital transactions. According to a recent study, biometrically verified mobile commerce transactions are expected to account for a whopping 57% of the total biometric transaction by 2023. Biometric payment cards are also becoming popular as they support push and move payments, allowing users to make faster digital transactions. Digital payment technology provider Worldline has partnered with France’s FinTech, A3BC (Anything Anywhere Anytime Biometric Connection), to protect mobile phones from intrusion through a two-factor authentication process. The combined solution eliminates one-touch identification, but rather recognizes fingerprints through a photo of the hand. MasterCard plans to introduce FinGo’s vein scan payment solution, which makes it easier for users to authenticate transactions.
Dominance of mobile wallets
In 2019, mobile wallets overtook credit cards to become the widely accepted type of payment worldwide. Digital wallets offer the flexibility for consumers to store multiple payment methods in one digital home and to convert cash into electronic money needed for online or in-store purchases. Financial institutions have already begun to embrace the digital portfolio trend by offering virtual cards to business customers. Virtual cards stored in digital wallets consist of details such as a 16-digit card number, CVV code, expiration date and work just like a physical plastic card. Currently, only 37% of merchants support mobile payments at the point of sale, but with increasing acceptance, merchants are willing to invest in technologies that facilitate digital wallets. Virtual wallets can save money due to low processing costs, as they limit the value and frequency of transactions. Artificial Intelligence (AI) enhances the user experience with ChatBots transactions designed to perform and robotize basic exchanges according to the user’s interest. In addition, e-wallets based on cryptographic money are being adopted by new companies for small and medium-sized digital money storage organizations. Smart voice technology has contributed to the growth of smart voice portfolios since Amazon launched the principle of this platform, which is now followed by Google and Apple.
The e-commerce boom is accelerating the growth of the digital payments market
The growth of e-commerce at an exponential rate is creating shock waves and the sound boom is echoing in the FinTech sector. The growth of many e-commerce companies is driven by the type of financial services they provide. Digital transactions make it convenient for buyers and sellers to make transactions and remain loyal to the market space. The COVID-19 pandemic added a different dimension to e-commerce innovation by introducing newer trends such as alternatives to cash registers (not digital wallets), virtual cards, QR codes and other contactless transactions. In addition, the Buy Now, Pay Later (BNPL) trend dominates the e-commerce industry as it eases the financial burden for the buyer. The BNPL includes a soft credit check so that consumers can buy what they need, maintain inventory movement and pay overtime without affecting their credit rating. BNPL provides businesses with much-needed liquidity and greater cash flexibility.
Impact of the COVID-19 pandemic on the growth of the digital payments market
Digital payment systems have gone beyond their peer-to-peer (P2P) transfers and bill payments. The COVID-19 pandemic has allowed digital payment systems to show their strengths, such as a strong understanding of hyperlocal markets and their ability to establish strong local partnerships. Businesses and consumers are increasingly “switching to digitalisation” to provide and purchase goods and services online. When the pandemic struck, people did not want to touch or exchange cash because of the paranoia of catching the infection from physical currencies. Several governments around the world have introduced digital financial transfers to provide assistance to COVID. Due to the blocking measures, users have switched to online platforms, which catapults the demand for digital payment systems. Digital platforms have now become a major component of people’s lives, and consumers are more likely to continue shopping online in the aftermath of the pandemic. The dramatic change in consumer behavior is likely to further increase the demand for electronic payment systems. That’s why companies are focusing on digital media to meet new customer requirements and thrive their businesses in a changing market scenario. Organizations are rethinking customer travel to reduce friction and provide new security features. Payment companies such as PayPal and Square Cash are recruiting staff everywhere to better understand the rearrangement of public norms and to stabilize the business in the near future.
Electronic payment systems are the future
With the growing penetration of smartphones and the Internet, consumers are becoming technological, which provides endless opportunities for digital payment markets. Digital payment systems after the pandemic are expected to continue to thrive in the coming years. Although cards remain the first choice for payments worldwide, mobile wallets are rapidly gaining popularity. Traditional cash flow is declining in bank branches and ATMs, demonstrating a move towards a cashless society. China currently dominates global consumption of mobile wallets, followed by South Korea. However, there are still many countries that are highly dependent on cash due to a lack of trust in financial institutions and a lack of adequate broadband infrastructure, and so on. to become widespread in developing countries as well.
Concerns about cybersecurity and privacy with online payment solutions
Threats to cybersecurity and confidentiality have become a worrying concern with growing cases of online fraud. According to a Mastercard survey, one in four consumers suffered some form of fraud in 2020, which increased the cybercrime rate by 49%. In the first half of 2020, online fraud increased by 73.8% compared to 2019. However, the adoption of new era technologies such as multi-factor authentication, biometrics, 3D security, artificial intelligence and machine learning can help control fraud activities such as phishing, virus attacks, etc. Switching to contactless cards, QR codes and tokenization can also help mitigate the risks associated with digital payment solutions. In addition, informing end-users about the secure implementation of electronic payment solutions by stepping up efforts to build financial literacy can help prevent fraud. The advent of mobile commerce and the evolution of e-payment platforms, backed by robust security solutions, can help achieve the goal of making the economy truly cashless.