The cashless payment system is growing exponentially with the evolution of payment methods, the increase in the use of electronic commerce, the improvement of broadband connectivity and the appearance of new technologies. Can the increasing incidence of cyber-attacks and spam hinder the growth of the online payments market or will it continue to grow at a rapid pace?

The global digital payments industry is expected to reach the USD 6.6 trillion mark in 2021, registering an increase of around 40% in two years. Cashless payment methods are rapidly evolving with breakthrough innovations such as mobile wallets, mobile peer-to-peer (P2P) payments, real-time payments, and cryptocurrencies. In the growing digital age, many payment technology companies are collaborating with traditional financial institutions to meet the latest consumer and merchant preferences. Due to the improvement of broadband connectivity, the rise of mobile commerce, the emergence of new technologies such as virtual reality, artificial intelligence and rapid digitization, billions of people have started to adopt contactless payments both in developed and emerging countries. In addition, the growing e-commerce businesses, digital remittances, digital business payments, and mobile B2B payments are driving the non-cash transaction ecosystem.

Peer-to-peer (P2P) digital applications are widely adopted by multi-generation cashless transaction method users as they are more attractive and flexible to use. In-app payments or tap-and-play transactions take seconds to checkout and allow users to make payments anytime, anywhere. Tokenization, encryption, Secure Sockets Layer (SSL), etc., offer multiple ways to protect payments while enabling digital transactions. Also, users do not have to fill in information each time to complete the checkout process. Therefore, online payment gateways play a crucial role in economic growth, enabling commerce in the modern economy. With social distancing rules in place, digital payments have become a must for contactless transactions rather than just a transaction alternative to prevent the spread of the coronavirus.

Digital commerce empowering companies

Electronic payment systems have become a crucial part of businesses as consumer inclination to shop online expands. With expanding Internet penetration, increased use of smartphones, and various options for electronic transactions, most consumers prefer online channels over traditional brick-and-mortar stores for shopping. Therefore, companies are turning online with an electronic payment solution to maximize their profits. Automation of the electronic payment system eliminates the scope for errors and saves a considerable amount of time and effort. High standards for detecting and preventing fraud in digital transaction systems and AI-based fraud detections 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. Electronic payment processing improves customer satisfaction, as customers don’t need to count cash or deal with paperwork every time they want to make a transaction.

Biometric authentication that improves security

Biometric authentication involves the recognition of biometric features and structural features to verify the identification of an individual. The verification method may include fingerprint scanning, facial recognition, voice recognition, vein mapping, iris detection, and heartbeat analysis. With the increase in identity theft and fraud, biometric authentication has become a trusted and secure alternative for conducting digital transactions. According to recent research, biometrically verified m-commerce transactions are expected to make up a massive 57% of total biometric transactions by 2023. Biometric payment cards are also becoming popular as they support touch payments, allowing users to make digital payments faster. proceedings. Digital payment technology provider, Worldline, has partnered with French fintech, A3BC (Anything Anywhere Anytime Biometric Connection), to protect mobile phones from intrusions with a two-factor authentication process. The combined solution eliminates identification through a single touch, but instead recognizes fingerprints through an image of the hand. MasterCard plans to bring FinGo’s vein scanning payment solution that makes it easy for users to authenticate transactions.

Mobile wallet dominance

In 2019, mobile wallets overtook credit cards to become the most widely adopted payment type globally. Digital wallets offer users the flexibility to store multiple payment methods in a digital home and convert cash into e-money required for online or in-store purchases. Financial institutions have already started to embrace the digital wallet trend by offering virtual cards to business customers. Virtual cards stored in digital wallets consist of details like 16-digit card number, CVV code, expiration date and work like the physical plastic card. Currently, only 37% of merchants support mobile payments at the point of sale, but with increasing adoption, 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 values ​​and frequency of transactions. Artificial Intelligence (AI) is improving the user experience regarding transactions with ChatBots, designed to execute and robotize essential exchanges based on user interest. Also, crypto-based e-wallets are being adopted by startups and small to medium-sized organizations to store digital money. Intelligent voice technology is contributing to the growth of intelligent voice wallets since Amazon pioneered the platform, which is now followed by Google and Apple.

The rise of e-commerce accelerates the growth of the digital payments market

The growth of e-commerce at an exponential rate is creating shock waves, and the sonic boom is reverberating throughout 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 the buyer and seller to transact and remain loyal to the market space. The COVID-19 pandemic added a different dimension to e-commerce innovation, introducing new trends such as checkout alternatives (not digital wallets), virtual cards, QR codes, and other contactless transactions. Furthermore, the Buy Now Pay Later (BNPL) trend is dominating the e-commerce industry as it eases the financial burden on the buyer. BNPL involves a smooth credit check, so consumers can buy what they need, keep inventory moving, and pay overtime without affecting their credit score. BNPL provides businesses with much-needed liquidity and greater cash flexibility.

Influence of the COVID-19 pandemic on the growth of the digital payments market

Digital payment systems have gone beyond their peer-to-peer (P2P) bill payments and transfers. The COVID-19 pandemic allowed digital payment systems to show their strengths, such as a strong understanding of hyper-local markets and their ability to build strong local partnerships. Businesses and consumers have increasingly “go digital” to provide and purchase goods and services online. When the pandemic hit, people did not want to touch or change cash out of paranoia about getting infected from physical currencies. Several governments around the world have introduced digital financial transfers to provide COVID assistance. Due to the confinement measures, consumers switched to online platforms, which catapulted the demand for digital payment systems. Now, digital platforms have become an essential component of people’s lives, and consumers are more likely to continue shopping online in the post-pandemic period. The drastic change in consumer behavior is likely to further increase the demand for electronic payment systems. Therefore, companies are turning their attention to digital media to meet new customer demands and prosper business in the changing market scenario. Organizations are reinventing customer journeys to reduce friction and provide new security features. Payment companies like PayPal and Square Cash are staffing across the board to better understand the shakeup of social norms and stabilize the business in the near future.

Electronic payment systems are the future

With increasing smartphone and internet penetration, consumers are becoming tech-savvy, presenting endless opportunities for digital payment marketplaces. Post-pandemic digital payment systems are expected to continue to flourish for years to come. While cards are still the first choice for payments around the world, mobile wallets are quickly gaining ground. Traditional cash flow is declining at bank branches and ATMs, demonstrating a power move toward a cashless society. Currently, China dominates the global consumption of mobile wallets, followed by South Korea. However, there are still many countries that are highly cash dependent due to lack of trust towards financial institutions and lack of proper broadband infrastructure etc. In the near future, social media-initiated payments, biometric payments and voice-activated payments are likely to become more widespread in developing countries as well.

Cybersecurity and privacy issues with online payment solutions

Cyber ​​security and privacy threats have become a troubling concern due to the increasing incidence of online fraud. According to the Mastercard survey, one in four consumers experienced some form of fraud in 2020, increasing the cybercrime rate by 49%. In the first half of 2020, online scams increased 73.8% over 2019. However, the adoption of new-age technologies such as multi-factor authentication, biometrics, 3D security, artificial intelligence, and Machine learning can help control fraudulent activities such as phishing and virus attacks. , etc. Switching to contactless cards, QR codes, and tokenization can also help mitigate the risks associated with digital payment solutions. In addition, raising end-user awareness of the secure application of electronic payment solutions by expanding efforts to develop financial education can help prevent fraud. The rise of mobile commerce and the evolution of electronic payment platforms backed by strong security solutions can help further the goal of making the economy truly cashless.