Digital payments are part of our everyday lives. We use cell phones and even wearables to make contactless payments in-store, while P2P payment systems like Venmo have become increasingly popular too. Cryptocurrency and blockchain have also been thrust to the fore, especially as they took center stage during the recent US election. While cash certainly isn’t dead yet, its crown as the king of payments is looking precariously balanced.
Digital Payment Popularity
Digital payments, whether online using digital wallets or in person via contactless payment methods like mobile phone or wearable, are becoming increasingly popular. They are convenient, security efforts have been ramped up, and the technologies they rely on have improved. As such, established businesses and even financial institutions not only accept digital payments but are looking for ways to innovate and use the technology to enhance their business efforts.
Meanwhile, emerging ecommerce sites, innovative local businesses, and new crypto casino sites are being established that specifically target these payment methods. Crypto casinos, for example, offer faster withdrawals and deposits compared to traditional online casinos, and some ecommerce sites offer special bonuses to those who use digital payment methods.
Digital Wallets
A digital wallet is a piece of software that sits on an electronic device. The wallet stores payment information and funds can typically be deposited to the wallet using traditional payment methods. Some also accept cryptocurrency transfers. They offer an extra layer of security between a consumer’s money and the stores and businesses they spend that money.
Modern wallets can also include loyalty cards and can even incorporate event tickets and more. They aim to offer convenience, as well as security. Digital wallets do rely on device technology as well as Internet connections, and not all stores are set up to accept them. Yet.
This infrastructure will likely expand further in the coming year, with small to large businesses accepting digital wallet payments. And the wallets themselves will likely become even more advanced and packed with unique features.
Wearables
Digital wallets are commonly installed on cell phones, as well as computers and other home devices. In fact, two of the most popular digital wallets are Apple Pay and Google Pay and these are primarily used on Apple and Android phones.
Wearables, like smartwatches and even smart rings, can be updated to incorporate some digital wallets, which means users don’t even need to get their phones out or carry them with them when shopping. Wearables are becoming more affordable and their features are more advanced, which means more of these devices will sell in the future.
Generally, wearable devices can be used to make payments anywhere that cell phones can be used, but as we see more people buying wearable devices, we are also likely to see their use as payment devices increase. We may also see the emergence of new types of devices, although it is difficult to see exactly what these devices would be.
Cryptocurrency Integration
Cryptocurrency is a disruptive technology. Bitcoin has continued to defy critics and become increasingly mainstream, ever since its inception in 2009. And, there are now thousands of different cryptocurrencies, including many that are quicker and even less expensive to use than BTC.
There is still only a relatively small percentage of businesses and stores that accept this payment method, but blockchain, which is the technology that underpins cryptocurrency, has the potential to change finance.
One way it can do this is by reducing the cost of overseas transactions and offering instant payments to recipients anywhere in the world. It will likely continue to grow in the coming months and years, especially as governments, businesses, and individuals look for more ways to use it. At the very least, we can expect to see more digital wallets start to accept and use cryptocurrency in the future.
The Introduction of CBDCs
Banks haven’t, for the most part, welcomed the emergence of cryptocurrency, although some have forged partnerships with companies like Ripple and Circle.
They have, however, started to come around to the benefits of digital currencies, and many governments and financial bodies are at least investigating the benefits of launching their own digital currency equivalents, called Central Bank Digital Currencies (CBDCs).
China, the US, and the EU are known to be actively exploring these opportunities, and they could see traditional payment methods becoming quicker, less expensive, and more secure.
Greater Adoption Of Super Wallets
Super wallets and super apps are already popular in Asian markets. These apps combine the features of lots of other apps, such as social media, messaging, and other forms of communication, as well as ecommerce and payments.
They are convenient because they offer access to everything from a single platform, and the different elements can interact with one another. Meta is believed to want to become a global super app, and where Meta leads, other companies follow.
Whether we will see the likes of Alipay+ spread throughout the rest of the world, Meta achieves its dream of becoming the super app of choice around the world, or a new name enters the market, it is likely that super apps and super wallets, which will also incorporate cryptocurrency, become more popular.
Increased Use On Ecommerce Sites
There is substantial demand for the use of digital payments from consumers, and this will increase as younger generations, who are typically more comfortable using modern technologies, age.
Digital payments will become the norm and businesses will have to catch up. Currently, not all ecommerce sites offer digital payment options, with many still preferring to receive remittances via debit or credit payments.
However, payment gateways are expanding their own digital wallet acceptance, and this means that ecommerce sites will naturally be able to accept a wider range of payment solutions so digital payments will become more commonplace.
More Alternative Credit Solutions
The likes of Klarna have become fairly well known, and offer alternative credit solutions to consumers, including those using digital payments.
Buy Now Pay Later has long been an option when buying big-ticket items like furniture and white goods, and it has already become more popular for some smaller items.
The younger generation is especially keen on BNPL options for everyday items like clothing, and as businesses offer access to digital payment solutions and modern payment gateways, these will become even more commonplace on ecommerce sites for a greater range of products.
Cash Won’t Completely Die… Yet
Cash use has been on the decline in recent years but, while contactless and digital payments will continue to dominate headlines and pick up further pace, accompanied by the emergence of cryptocurrency technologies, cash will be with us for a long time yet.
Digital payments rely on good Internet connectivity and penetration, while consumers need access to decent cell phones and other technology to be able to use the technologies in their everyday lives. While developed countries have these technologies, large swathes of the world do not.
Similarly, older generations are less inclined to turn away from cash and can struggle with digital payments. And, if Internet connectivity drops, digital payments are rendered largely useless, which means cash will remain a backup to these modern payment technologies in a lot of instances.
Digital P2P Payments
Digital payments aren’t just concerned with paying businesses for goods and services. Their use is spreading into peer-to-peer or person-to-person payments, too.
Where it was once necessary to go through the steps of setting up a bank transfer and confirming payment details to send money to friends and family, digital payments make it much easier. PayPal even has a friends and family payment service designed specifically for this purpose.
More recently, services like Venmo have been established for the very purpose of sending cash to loved ones. Not only are we likely to see more companies and apps enter this market, but we will likely see improved technologies and ways that these payments are used.
New Technologies
The digital payment sector sees a lot of investment from financial institutions as well as individual businesses and even app developers. This means new technologies will be implemented, especially where they benefit the payment service.
We have already seen more innovative ways to offer dynamic rewards and dynamic payments, while Apple Tap To Pay is being introduced on cell phones, which will enable any small business with an iPhone to be able to access card and digital payments.
Biometric authentication is becoming commonplace and is just one way that companies are improving the security behind these payment solutions, too. What’s more, as AI continues to advance we can expect its integration into payment systems, especially to aid in security.
Conclusion
Digital payments offer innovative, convenient payment methods. It is quicker and easier to tap a cell phone than it is to withdraw cash or even use a debit or credit card. As such, the popularity of digital payments continues to increase. And, with that popularity comes a greater number of businesses looking to offer digital payment solutions.
It isn’t just banks and financial institutions that are major players in digital payments. App makers and other companies are also heavily involved in the development of the sector.
