The future of payments is exciting – one filled with more convenience, efficiency, security, and accessibility than ever before. As technology evolves and develops rapidly, so will our ability to make payments quickly and securely.
Payment technology has rapidly evolved in recent years, showing no signs of slowing down. Companies like Apple, Google, and Amazon have revolutionized how we manage money and make payments. But what does the future of payments look like?
In this blog, we’ll explore the evolution of the payments industry, why these advancements are crucial for businesses and consumers, and discuss the various types of payment methods that could become commonplace in the near future.
Navigating the current payments landscape
The payments industry today is one of the most rapidly changing and dynamic spaces in the world of technology. How we make payments has changed drastically over the past decade. Digital solutions are rising, while traditional methods such as cash are slowly being phased out. Given that recent research anticipates the global payments industry catapulting to a staggering $3 trillion valuation by 2026, the industry shows no signs of slowing down.
Payment methods have become increasingly diverse over time. We are seeing new options, such as mobile wallets and contactless cards, providing users a quick and secure way to transact. Banks have also increased their payment options, from online banking services to payment apps that allow users to manage their finances on the go, offering consumers endless possibilities.
Security remains an important issue in the payments industry, particularly regarding online transactions. Security measures such as two-factor authentication and biometric identification solutions are being introduced to keep customer data secure at all times. Banks are also implementing encryption technology to protect sensitive information from hackers or malicious actors.
Trends to watch
Digital Wallets
Digital wallet use is expected to hit 4.8 billion by 2025. This payment method is gaining momentum amongst consumers due to its convenience and ease of use. A digital wallet is an application on a device that securely stores payment information to allow users to make payments electronically. Digital wallets can include debit and credit cards, bank account details, stored value cards, loyalty points, and membership cards.
Not only are we seeing digital wallets surge as a payment method, but their functionality has become one of the most sought-after features, negating the need for many consumers to carry a physical wallet. In fact, 15% of digital wallet users admit to regularly leaving their physical wallet at home.
Already, we are seeing an increasing number of retailers offering digital payment options at checkout counters in stores or when ordering online. Banks have also begun to partner with digital wallet providers so customers can easily link their accounts directly from their banking app. As companies strive to make payments faster, simpler, and more secure for all parties, the introduction and advancement of digital wallets is set to rise and shape the payments industry.
Real-time payments
Real-time payments are quickly becoming a significant trend in the payments industry. Real-time payments enable customers to make secure and instantaneous transactions without requiring lengthy processing times. Customers can send and receive money instantly, anytime, anywhere, without worrying about time delays or processing fees. With a year-on-year growth of 63%, this payment method has revolutionized how people transact, providing more convenience and flexibility than ever before.
Real-time payment networks, or 'rails,' are the digital infrastructure facilitating real-time payments. Recently emerging, the ‘FedNow’ Service has provided another resource, instant payment services in the US. This new infrastructure demonstrates the growth within the industry and increased demand. With 9000 banks and credit unions in the United States set to gradually sign up to the service, instant payments are expected to become the reality of everyday commerce.
The adoption of real-time payments will likely accelerate in the coming years due to its growing popularity among consumers and businesses. The contrast of faster settlement times, increased security features and cost savings to traditional methods make it an attractive payment option for banks and consumers. Real-time payments are poised to transform the industry, offering enhanced efficiency and an improved online transaction experience.
Banks and fintech partnerships
There has been a global trend of traditional banks and fintech firms collaborating, with 75% of banks planning to engage with a fintech organization inthe future. The budding partnerships allow for innovative solutions and new products for their customers. Through partnering with Fintechs, banks have been able to leverage their expertise in areas such as artificial intelligence (AI), data analytics, and cloud computing.
Banks have become aware that their legacy solutions cannot keep pace with the digitization of the payments industry. Leaning on Fintech's ready-to-use solutions, they can help to reduce the strain on banks' in-house resources and create a better customer experience. On the other side, Fintech organizations are also beneficiaries of the partnership. Fintechs can leverage the trust and credibility banks have built with their customers and capitalize on in-depth regulatory and industry knowledge.
Overall, the convergence between banking and fintech is driving innovation across the entire payments industry, enabling faster processing times, increased security features, global reachability, and cost savings compared to traditional methods – all while providing a seamless user experience for customers around the globe.
Looking forward
The payments industry is undergoing a period of rapid evolution, driven by technological advances and customer demand for convenience. Emerging payment trends are influencing consumer and business behavior and changing everyday financial interactions.
Banks and payment organizations should be aware of these trends to proactively respond, provide the best customer experience and remain competitive.
Backed by innovation
While customer expectations and trends will change, our commitment to innovation will remain. Data Zoo replaces slow and manual processes with research-backed, patented technology for fast and frictionless onboarding experiences. This means fewer verification failures, more customers onboarded, and more revenue.
Ready to see the difference? Our expert team will be at Money20/20 in Las Vegas from October 22-25. Meet us at Stand 1011 to see what you can do with Data Zoo.