The cashless payment system is growing exponentially with the development of payment methods, the increasing use of e-commerce, improved broadband and the emergence of new technologies. Can the growing number of cyber attacks and spam hinder the growth of the online payment market or will it continue to grow at a rapid pace?
The global digital payment industry is expected to reach the $ 6.6 trillion mark in 2021, recording a jump of about 40% 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 collaborating with traditional financial institutions to meet the latest preferences of consumers and merchants. Due to improved broadband connectivity, increased mobile commerce, the emergence of new technologies such as virtual reality, artificial intelligence and rapid digitization, billions of people have begun to accept contactless payments in both developed and developing countries. In addition, growing e-commerce businesses, digital remittances, digital business payments and mobile B2B payments are strengthening the ecosystem of cashless transactions.
Users of cashless transaction methods in different generations are widely adopting digital peer-to-peer (P2P) applications because they are more attractive and flexible to use. In-app payments or tap-and-go transactions take a few seconds to charge and allow users to make payments anytime, anywhere. Tokenization, encryption, Secure Sockets Layer (SSL), etc., offer multiple ways to secure payments while enabling digital transactions. In addition, users do not have to enter data every time to complete the payment process. Thus, online payment applicants play a key role in economic growth, enabling trade in the modern 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 empowers businesses
Electronic payment systems have become a key part of business as consumers’ propensity to shop online expands. With increasing internet penetration, increasing use of smartphones and a variety of e-transaction options, most consumers prefer online channels over traditional shopping stores. Therefore, companies are moving to the internet with an electronic payment solution to maximize their earnings. Automation of electronic payment systems eliminates the volume of errors and saves a significant amount of time and effort. High standards for detecting and preventing fraud in digital transaction systems and fraud detection based on artificial intelligence protect users from security breaches. By providing the flexibility to pay by credit / debit card, mobile money, e-wallet, etc., companies can expand their customer base. The electronic payment process improves customer satisfaction because customers do not have to count cash or deal with paperwork whenever they want to make a transaction.
Biometric authentication that improves security
Biometric authentication involves the recognition of biometric characteristics and structural characteristics to confirm the identification of an individual. Verification methods may include fingerprint scanning, face 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 conducting digital transactions. According to a recent study, biometrically verified mobile commerce transactions are expected to account for a massive 57% of total biometric transactions by 2023. Biometric payment cards are also becoming popular because they support tap-and-go payments, allowing users to make faster digital payments. transactions. Digital payment technology provider Worldline has partnered with French 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, preferring to recognize fingerprints over a hand image. MasterCard plans to introduce FinGo’s vein scan payment solution that makes it easier for users to authenticate transactions.
The dominance of mobile wallets
In 2019, mobile wallets overtook credit cards and became a widely accepted type of payment. Digital wallets offer the flexibility for users to store multiple payment methods in one digital home and convert cash into electronic money needed for online or in-store purchases. Financial institutions have already begun to embrace the digital wallet trend by offering virtual cards to business users. Virtual cards stored in digital wallets consist of details such as a 16-digit card number, CVV code, expiration date and function as a physical plastic card. Currently, only 37% of merchants support mobile point-of-sale payments, but with increasing adoption, merchants are willing to invest in technologies that make digital wallets easier. Virtual wallets can save money due to low processing costs because they limit the value and frequency of transactions. Artificial Intelligence (AI) enhances the user experience regarding transactions with ChatBots, designed to execute and robotize essential exchanges according to user interest. In addition, new companies are embracing cryptocurrency-based e-wallets for small and medium-sized digital money storage organizations. Smart voice technology has contributed to the growth of smart voice wallets 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 payment market
The growth of e-commerce at exponential speeds is creating shock waves, and the sound boom is echoing throughout the FinTech sector. The growth of many e-commerce companies is driven by the type of financial services they provide. Digital transactions allow buyers and sellers to conduct transactions and remain loyal to the market space. The COVID-19 pandemic has added a different dimension to e-commerce innovation, introducing newer trends such as alternatives to cash register payments (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 relieves the financial burden for the customer. BNPL includes a soft credit check so consumers can buy what they need, keep inventory on the go, and pay for overtime without affecting their credit score. BNPL provides companies with much-needed liquidity and greater flexibility at the cash register.
The impact of the COVID-19 pandemic on the growth of the digital payments market
Digital payment systems have surpassed their peer-to-peer (P2P) transfers and bill payments. The COVID-19 pandemic has enabled digital payment systems to demonstrate their strengths, such as a strong understanding of hyper-local markets and the ability to build strong local partnerships. Businesses and consumers have increasingly “switched digitally” to providing and purchasing goods and services online. When the pandemic hit, people were reluctant to touch or change cash due to the paranoia of being infected with physical currencies. Several governments around the world have introduced digital financial transfers to provide assistance to COVID. Due to isolation measures, consumers have switched to online platforms, which has 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. A dramatic change in consumer behavior is likely to further increase the demand for e-payment systems. Therefore, companies are turning their attention to digital media to meet new customer demands and thrive in a changing market scenario. Organizations are re-imagining customer travel to reduce friction and provide new safety features. Paying companies such as PayPal and Square Cash are recruiting comprehensive staff to better understand the rearrangement of social norms and stabilize business in the near future.
E-payment systems are the future
With the penetration of smartphones and the Internet, consumers are becoming technologically smart, which represents endless opportunities for digital payment markets. Digital payment systems are expected to continue to flourish in the years to come after the pandemic. While cards remain the first choice for payments around the world, mobile wallets are quickly gaining in strength. Traditional cash flow is declining in bank branches and ATMs, showing a powerful shift towards a cashless society. Currently, China dominates global mobile wallet consumption, followed by South Korea. However, there are still many countries that are heavily dependent on cash due to a lack of trust in financial institutions and a lack of adequate broadband infrastructure, etc. In the near future, payments on social networks, biometric payments, payments via voice activation are likely. become mainstream in developing countries as well.
Concerns about cyber security and privacy with online payment solutions
Threats to cybersecurity and privacy have become a worrying concern given the increasing incidence of cyberbullying. According to a Mastercard survey, every fourth consumer experienced 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 age technologies such as multifactor authentication, biometrics, 3D security, artificial intelligence and machine learning can help control fraudulent activities such as which are identity theft, virus attacks, etc. Switching to contactless cards, QR codes and tokenization can also help reduce the risks associated with digital payment solutions. In addition, sensitizing end users to the secure implementation of e-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 cash-free.