In 2020, market size of the global digital payments was valued at US$58.30 billion. From 2021 to 2028, the market is expected to grow at a compounded annual growth rate (CAGR) of 19.4% . In this blog, we talk about what are some of the most important payment trends that will contribute to this growth.
The pandemic has brought about some drastic changes in how we make payments. It is largely because of the dramatic changes in consumer behaviour which can be said was due to the COVID-19 outbreak. Amidst 2020, numerous digital payment entrants emerged that offered groundbreaking payment solutions that significantly changed the payments ecosystem. The momentous year has forced businesses to pivot towards digital payments and customers, who were at first hesitant to try online shopping, to shop groceries and essentials online.
Based on these major shifts in how we shop, eat and do almost anything, here are the top 8 payment trends that will contribute heavily in shaping 2021 as we continue to figure out the ‘new normal’.
8 Exciting payment trends to watch out for in 2021
The fusion of FinTechs and banks
Traditional banking institutions of the world have immense knowledge about the finance industry and market. They also have access to huge customer bases as well as have brand recognition. Despite having all these factors in their favor, banks lack the capacity to meet the ever-growing demand of customers for customization, personalization and speed when it comes to transaction processing. As traditional banks have a weak innovation culture and/or slow adoption of technology, they’re faced with a big challenge of implementing high-end, cutting-edge technologies in the banking sector.
This challenge is addressed by one of the payment trends seen in 2021 – the fusion of traditional banking institutions with financial technology (FinTech) organizations. Needless to say, customers dictate the demand for having a digitized service. They also dictate what kind of services they’re expecting from a bank that can be offered by a bank by collaborating with a FinTech.
FinTech organizations empower customers to serve themselves with banking services irrespective of the location they’re at and time they are in. FinTechs are all about revolutionizing the e-payment industry with groundbreaking technologies. They are more into providing the customers an overall seamless experience by creating faster and accessible financial services. This is why we see banks merging with FinTechs as one of the most powerful digital payment trends of 2021.
Banks around the world are now, more than ever, willing to invest their resources in delivering a better customer experience which is why they are joining forces with FinTech startups for providing improved data retrieval along with an agile, reliable front-end. Partnering with the right FinTech firms can prove to be beneficial for traditional banks as it will become easier for them to provide personalized services.
From products and services that resolve issues of customers to maintaining long-lasting relationships with them, the FinTech industry is doing its best to fulfil all these demands with fresh strategies, personalization, loyalty programs, operating models and engagement capabilities.
Moving on to payment trends in B2B, FinTech organizations worldwide are focused at bringing disruptive payment trends in technology. They’re determined to change the present and future of the financial market by developing disruptive technologies and capitalizing on the same. Because of these payment trends they observe in everyday life, they’re getting used to the seamless and convenient experience they provide. As they’re used to the convenience of these faster payment technologies, customers now expect the same level of service from the B2B payments sector.
The B2B sector is now demanding for speed and personalization which is forcing the payments ecosystem to reconstruct the world of corporates. This is gaining spotlight especially due to the continuous growth for corporate loans and the ease in credit underwriting standards.
The B2B payment trends around the world are currently witnessing a remodelling also because of the intensified global competition. B2B payment trends 2021 will see increased adaptation of integrated digital payments platforms, process digitization for streamlining operations such as invoicing and payment scheduling and providing complete transparency.
One of the most irritating things and biggest challenges businesses have to face is late payments. To solve this issue, cloud-based payment technologies are emerging that use a network of remote servers hosted on the internet to make payments faster and timely. The servers are responsible for storing, managing and processing the payment instead of a single local service.
Why is cloud technology as a payment trend in 2021 is gaining recognition? It is because cloud tech leverages the advantages of cloud computing, like flexibility, automation, quicker cash flow and security. Packed with all these benefits, cloud-based payments upgrade your traditional payment system and eliminates the perils of late payments. A few other benefits of this digital payment trend is its feasibility, cost-effectiveness and reliability.
Real-time payments (RTPs)
A new buzzword circulating around the FinTech and payments industries is real-time payment or RTP. It is so due to its power of providing speed, security and convenience. RTP is being widely accepted and implemented by customers around the world. The global RTP market size in 2020 was valued at US$10.64 billion. The market is expected to grow at a compounded annual growth rate (CAGR) of 33% from 2021 to 2028 .
RTP ensures availability of funds to the transaction beneficiary. It is designed to run on the principles for faster payments set by the Consumer Financial Protection Bureau (CFPB). One of the most useful payment trends, RTP essentially provides notifications on a real-time basis for every transaction, like invoices with payments, confirmation messages, account statements and payment requests. These features in RTP systems help in maintaining transparency between both the parties.
Moreover, RTP systems are equipped with in-built features like in-app shopping, split bills, P2P payments, cash management, etc. RTP in B2B also plays a crucial role as it provides services like bill pay, e-invoicing, claim settlement and payments in addition to insurance services.
Buy now, pay later
At almost every online shopping website and mobile app, customers are seeing an option to buy now and pay later in installments. Next-generation installment payment service providers like Afterpay and Splitit use machine learning, big data and automation to make more informed loan approval decisions within seconds.
The Ascent conducted a survey asking 2000 Americans questions about their BNPL habits . The 2021 study found its 55.8% responders saying they’ve used at least 1 BNPL service, which is up from 37.65% since July 2020. Among BNPL users who’ve used the service more since the lockdown was declared, 41% responders say they’ve used it to conserve cash for emergencies and 25% said it was because they lost income. Interestingly, 62% of buy now pay later users surveyed think that BNPL services could replace credit cards. However, just 25% want that to happen. Leading at 43%, PayPal’s BNPL service was found to be the most commonly used provider.
In order to reduce operational costs, eliminate the scope of duplication and provide an overall better customer experience, the next logical step in enhancing the efficiency of digital transformation is to integrate all sales channels. One of the most needed payment trends in 2021 is unified commerce that offers an integration of the online experience of M-commerce, e-commerce, inventory management, customer relationship management (CRM), catalogue management, point-of-sales features (POS), order fulfilment and other finance management tools in one single software.
It goes way beyond omnichannel commerce and makes the most of benefits provided by a centralized, common platform for commerce that supports business growth. Unified commerce enables reduced integration costs, seamless communication amongst multiple platforms, simplified onboarding, smooth eCommerce payments and real-time visibility with precision.
Smart speaker payments
Smart speakers and home assistants enable users to give voice commands. Earlier, they were used for things like traffic updates, weather updates, booking a cab from Uber, setting an alarm or reminder and ordering food from Zomato. However, with the continuous increase in acceptance, smart speakers are now also used for shopping online.
According to research by Statista, 35% of users utilize smart speakers for purchasing products like groceries, clothes and home care items. Moreover, 28% or users also took help of smart speakers and home assistants to make payments and send money . In 2021, transactions using smart speakers will be one of the groundbreaking payment trends. The future of smart speaker payments looks promising. Big tech companies like Amazon, Apple and Google are heavily investing in building their advanced smart speakers.
NFC payment trend
According to an analysis by Market Research Future, the global near field communication (NFC) market is expected to grow at a CAGR of 17%. In terms of revenue, the NFC market is expected to touch US$30 billion by 2023 . Due to its enhanced standards of security and ease-of-use, NFC has gained tremendous popularity in the past few years. This payment trend allows users to wave or tap on their smartphones to make a payment.
Also known as contactless payment technology, NFC is a faster and more secure way of making payments than the secure PIN technology used in cards. Tech companies like Apple, Samsung and Google already have their respective contactless payment systems – Apple Pay, Samsung Pay and Google Pay. The NFC payment technology is used in various countries. China uses NFC payments in public transport. Japan uses this technology to provide information about identity cards and London uses NFC in its tube and bus stations.
Mobile wallets & eWallets
In 2019, about 2.1 billion people were using mobile wallets, according to a RetailDive report. Since then, the numbers have only increased . Mobile wallet, or an eWallet, is a mobile app that tries to mimic a real physical wallet. Using mobile wallets, money can be sent and received amongst users and stores for future use in the wallet. It can also be used to buy tickets, pay utility bills, recharge mobile phones and much more. Mobile companies are putting effort in this mobile payment trend as well. Apple, Google and Samsung are working on developing their own brand-specific mobile wallets.
Wrapping up the payment trends
As the world is going digital, it is imperative to keep up with the latest digital payment trends and mobile payment trends. Integration of these trends in the payment industry can help you and your business make data driven decisions and mitigate fraud. It will make receiving money from and sending money to businesses quicker. It will also generate a sense of trust in your customers about the fact that you are equipped and updated with the latest payment trends.
Customers around the world are smart enough to understand which brands use outdated and inefficient payment technologies. They don’t shy away from turning a blind eye towards such brands. This is why organizations have to focus on the basics like designing or redesigning payment processes and technologies. It is expected from companies to continue planning, budgeting and building their digital and physical infrastructure while also maintaining compliance with regulations and standards.
2021 has so much to offer in terms of payment trends. Businesses need to rise to the occasion to get ahead of the curve by providing their customers with global, seamless, agile and secure payment options.
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