In recent years, digital payments have developed enormously, prompting the question: where will digital payment systems bring us in the future? As more customers become tech-savvy, there are limitless chances especially since we are just taking advantage of the unequally high potential of global smartphone penetration in 2020 with 3.2 billion smartphone users compared to around 7.7 billion in the world, or 41.5% according to Statista.
COVID-19’s influence has also hastened the change in payment preferences, in part due to comfort and in part because of guidance and focus on avoiding physical currency. Despite the argument, digital payments will not be lost and popularity will only rise in the years to come.
Cards are not unexpectedly the most common options for payments worldwide, which exceed real money, while mobile wallets fast grow in popularity, with the sector predicted to reach a trillion dollars in 2020.
According to the ECB, total digital payments in the region in the Euro area rose by 8.1 percent, up from EUR 162.1 trillion in 2019 to EUR 98.0 billion, and card payments accounted for 48 percent.
Of course, Europe’s digital payments system is sophisticated and well matured, and traditional cash infrastructure has now seen a drop in the banks and ATMs and further demonstrates Europe’s movement away from cash. Indeed, worldwide research has projected that Finland, Sweden, and the United Kingdom would likely lead to cashless transactions.
China is now the world’s leading mobile consumer wallet market on the opposite side of the planet, with about 70% of China’s customers routinely utilizing mobile wallets. The country is anticipated to produce about 80% of worldwide mobile wallet income by 2020, and China is likely to compete well in the battle for an effective cashless company with those statistics. However, by 2022, China is already providing a run for its money, with the bulk of the infrastructure already in force and over half of the 1,600 bank branches of South Korea no longer allowing cash deposits or withdrawals.
What is the future of digital payments?
In the short term, social media payments were launched, voice-activated payments were created, cryptocurrencies were created, biometric payments were made even in the face. One item is nevertheless clear, and it is important to pay attention to developing nations that will probably make a major contribution to that development. mobile payments and mobile wallets continue to be widely used in the foreseeable future.
In addition, NFC and QR codes will see acceptance as a secure and quick option for payment. Other nations, particularly the United States, adopted the payment method slowly in spite of the prominence of QR codes in China. However, this is expected to change because of the cost-efficiency of traders who now need less infrastructure for payment processing while making consumers more comfortable.
The second-largest and third-largest digital wallet markets after China are the USA, followed by the UK, with ApplePay the most frequently used product in the two regions. As e-commerce is currently a worldwide trend, digital consumption will continue to increase, and PayPal is now the world’s most common digital wallet – previously considered as the worst business concept in the check age. Because of the increasing popularity of using PayPal as the payment method, it has a drastic effect on the business and including those companies that are linked to the financial sector. One of the examples of this is the Forex market, where the number of the brokers that accept PayPal deposits increases from time to time. The global unbanked and underbanked sector offers the largest potential in the digital payment environment for development and innovation and helps to increase overall digital payments. Financial inclusion offers Fintech the opportunity to create solutions that give real value and meet genuine requirements, and the incumbents of developing nations will be totally circumvented in the form of challenges for a more nimble and adaptable approach.
So, what country is the winner of a cashless society?
A digital path ahead of the world is thrilling. But as financial sectors continue to make digital payments in all areas of the world, safety and trust should play an important role and a secure, dependable and strong payment infrastructure must thus be in place.
What are the pros and cons of a cashless society?
The growing number of digital payment methods – such as peer transactions, mobile payments, mobile point of sale, and digital currencies – provides companies and customers with a variety of choices with a promising range of options for openness, accessibility, and reliability.
Keeping the payments simpler and more comfortable and consequently easier to consume, cashless payment systems may boost development. They can give enterprises time and cost savings possibilities by decreasing manual reconciliation, counting, and cash management, and by reducing public costs of hard currency issuance.
Basically, it is advantageous to scan the payment process by making cross-border payment and procurement theoretically inexpensive and effective for everyone using a smartphone.
Digital central-bank currencies might minimize exchange risk and currency volatility from a more macroeconomic viewpoint if they are based on several currencies. Digital currencies may also be utilized, if centrally supported, like traditional currencies as economic levers. These are, of course, beyond apparent reductions in cost because coins and notes do not have to be produced.
On the other hand, despite all the major advantages offered by the various digital payment options, a major problem is their interoperability and business integration. Users may be compelled to utilize several services in the future when digital paging is generally accepted and the norm, with residual effects, for instance, a decline in the utility of these payments.
These technologies also provide opportunities for information and data mining, due to their digital nature, which may threaten security and privacy, as well as increasing the likelihood of cyberattacks leading to data theft and exploitation. No regulation is initial, and at times insufficient, and it may also allow the misconduct and abuse by service providers who are not always clear about how to monetize their systems’ data.
Furthermore, the power of technology companies is rising, as shown in the aim of Facebook to establish its own digital monetary platform. The supply may not be regulated, which in turn might result in devaluation and runaway inflation if digital money is not produced or controlled by a central bank. A good illustration of such volatility is the recent swings of Bitcoin based on Elon Musk’s investment.
Traditional VS digital payments
While conventional banks with existing systems are likely to find the digital transformation process an intimidating concept, digital currency rises, financial organizations such as FinTech and the like must reassess how their services might be compatible with an ever more digital environment.
The central banks, not individual FIs, have the obligation of responding to digital currencies and FinTech solutions. There is a danger that government-supported digital currencies might lead to deposits with a central bank, but also to decentralized opportunities. Visa has introduced a series of application program interfaces (APIs) to make bitcoin trades among regular institutions.
“When banks determine that it matches their plan, they may triumph in their huge coffers.” ‘It has become increasingly obvious that banks do not regard the provision of cash and transactional services as efficient, yet disaggregation can still harass them. Many FinTechs, including Monzo, Revolut, and Cashplus, began as alternative transactions but have become banks ever since. These organizations are now feasible options for auxiliary account clients to apply for profitable goods such as unsecured loans.