With the rapid growth of e-commerce, evolving payment methods, improved broadband connectivity, and new technologies, cashless payments are growing exponentially. Will the increase in cyberattacks and spams hinder the growth of the online payment market?
In 2021, the global digital payments industry will reach USD6.6 trillion. This is a 40 percent increase in just two years. New cashless payment methods such as mobile wallets and peer-to-peer mobile payments, real time payments, and cryptocurrency are all rapidly emerging. Many payment technology companies have teamed up with traditional financial institutions in order to meet the needs of modern merchants and consumers. Billions have embraced contactless payments, both in emerging and developed countries, due to the increased connectivity and mobile commerce, as well as new technologies like Virtual Reality and Artificial Intelligence. The non-cash transaction market is also being boosted by the growth of e-commerce and digital remittances.
Users of cashless transactions across different generations are increasingly adopting digital peer-to–peer (P2P), apps because they are more attractive and flexible. Tap-and-go transactions and in-app payments take only seconds at the checkout, and users can make payments from anywhere and anytime. There are many ways to secure payments and enable digital transactions, including encryption, tokenization, Secure Sockets Layer, SSL, and tokenization. The users don’t have to enter any information each time they complete the payment process. Online payment gateways are essential for economic growth and enabling trade in modern economies. Digital payments are now an obligation for contactless transactions, rather than a transaction option to stop the spread of coronavirus.
Digital Commerce Empowering Business
As consumers increasingly prefer online shopping, electronic payment systems are becoming a vital part of businesses. Due to increasing internet penetration and the use of smartphones, more consumers prefer online shopping over traditional brick-and mortar stores. To maximize profits, businesses are moving online using an electronic payment solution. The electronic payment system can be automated to eliminate the possibility of human error and save considerable time and effort. Security breaches are prevented by high standards in detecting and preventing digital fraud and AI-based fraud detections. Businesses can increase their customer base by offering the ability to make payments via credit/debit cards or mobile money, eWallet, and so on. Customers are more satisfied with electronic payments because they don’t have to deal with paperwork or count money.
Biometric authentication Enhancing Security
Biometric authentication is the recognition of biometric features and other structural characteristics in order to confirm an individual’s identity. This verification process can include fingerprint scanning, facial recognition and voice recognition. It also includes vein mapping, iris detection, vein mapping, voice recognition, heartbeat analysis, and vein mapping. Biometric authentication is a secure and reliable alternative to digital transactions due to the increase in fraud and identity theft. Recent research shows that 57% of all biometric transactions will be made by mobile commerce users who have been biometrically verified. They also support tap-and go payments which allows users to perform faster digital transactions. Worldline, a digital payment technology provider, has partnered up with A3BC (Anything Anywhere Anytime Biometric Connection), a French FinTech to secure mobile phones against intrusion using a two-factor authentication process. This combined solution does not require a single touch to identify the user, but rather recognizes fingerprints by taking a photograph of the hand. MasterCard will soon bring FinGo’s vein scanning payment solution, which allows users to authenticate transactions.
Predominance of Mobile Wallets
Mobile wallets have overtaken credit cards as the most popular payment method worldwide in 2019, surpassing them by a wide margin. Users can store multiple payment methods in a digital wallet and convert cash into electronic money for online or in-store purchase. Virtual cards are being offered by financial institutions to customers who use digital wallets. Digital wallets store details such as 16-digit card number and CVV code. They also work exactly like physical plastic cards. Only 37% of merchants currently support mobile payments at point of sale. However, with increasing adoption, merchants are more willing to invest in technology that facilitates digital wallets. Virtual wallets are cost-effective because they have low processing costs and limit transaction frequency. ChatBots are a form of Artificial Intelligence (AI), which is designed to automate and execute essential transactions according to the user’s preferences. New companies and small-medium businesses are now accepting cryptographic money-based electronic wallets for digital money storage. Since Amazon launched the principle of smart voice wallets, Google and Apple are now following suit.
Ecommerce Boom Accelerating Digital Payment Market Development
The rapid growth of e-commerce is creating shock waves and the boom is echoing across the FinTech sector. Many e-commerce businesses have seen their growth driven by their financial services. The ease of digital transactions allows buyers and sellers to transact and stay loyal to their market. COVID-19 introduced new trends to ecommerce, including payment options at checkouts (not using digital wallets), virtual card, QR codes and other touchless transactions. The Buy Now Pay Later trend (BNPL), is a dominant trend in e-commerce, as it eases the buyer’s financial burden. BNPL requires a soft credit check to ensure that consumers are able to buy what they need, keep their inventory moving, and pay overtime without affecting credit scores. BNPL gives businesses liquidity and more flexibility at the check-out.
Influence of the COVID-19 Pandemic On Digital Payment Market Growth
Digital payment systems are now more than peer-to-peer (P2P), bill payments and transfers. Digital payment systems were able to show their strengths thanks to the COVID-19 epidemic. These include a strong understanding and ability to form strong local partnerships. Consumers and businesses increasingly “went digital” to purchase goods and services online. People were afraid of getting the flu from cash and didn’t want to exchange money. Many governments across the globe introduced digital financial transfers in order to provide COVID assistance. Due to the lockdown measures, many consumers switched to online platforms which accelerated the demand for digital payment system. Digital platforms are now an integral part of people’s daily lives and they are more likely than ever to shop online after the pandemic. This dramatic shift in consumer behavior will likely increase the demand for electronic payment systems. Companies are now focusing on digital media to satisfy customer needs and grow their businesses in a changing market. To reduce friction and offer new security features, organizations are reinventing customer journeys. Square Cash and PayPal are expanding their workforces to help understand and stabilize the company’s future.
ePayment Systems are the Future
Consumers are becoming more tech-savvy thanks to increasing internet and smartphone penetration. This opens up endless opportunities for digital payment markets. Digital payment systems will continue to thrive after the pandemic. Mobile wallets are rapidly gaining popularity, even though cards continue to be the preferred method of payment. Traditional cash flows are declining at ATMs and banks, which is a sign of a shift towards a cashless society. China is currently the largest mobile wallet user, followed closely by South Korea. Despite this, many countries still rely heavily on cash because they lack trust in financial institutions and have poor broadband infrastructure. In the near future, voice-activated, voice-activated, and biometric payments as well as social media-initiated payment will be common in developing countries.
Privacy and Cybersecurity Concerns with Online Payment Solutions
With the rise in online fraud, cybersecurity and privacy concerns have become a serious concern. One in four consumers had experienced fraud in 2020 according to Mastercard, which has accelerated the cybercrime rate by 49%. Online scams rose by 73.8% in the first half 2020, compared to 2019. Online frauds have increased by 73.8% in the first half of 2020, compared to 2019. To reduce the risks associated with digital payments solutions, it is possible to switch to contactless cards and QR codes. In order to avoid frauds, it is important that end-users are educated about how secure e-payment solutions can be used. This can be done by focusing on financial literacy and increasing efforts towards building financial literacy. Mobile commerce, backed by strong security solutions, can be used to help drive the goal of making the economy cashless.
According TechSci’s research report “Global Payment Gateway MarketBy Type(Hosted, Self-hosted & bank integrated), By Enterprise Size, (SME or large enterprise), By End-User, (Retail, Travel & Hospitality, Healthcare, Government, Utilities & Others), by Region, Competition, Forecast & Opportunity, 2026″, the global gateway market will surpass USD15 billion in 2019. This represents a 22% CAGR for 2026. This is due to rising internet connectivity and the exponential growth in e-commerce.