According to Finaria.it, the global digital payments industry is expected to hit $6.6 trillion in value in 2021. The sector was valued at $5.4trn value in 2020. Before COVID 19, the industry was growing at a 16% YOY increase, but once the pandemic hit, the pace expedited to over 22%.
In the next four years, the digital payments market is set to reach $10.5trn in value. This steadfast growth results from the need to cater to an evolved consumer behaviour and tech advancements.
Consequently, the payments industry will witness innovative trends that will set the tone for 2021.
We are already six months into 2021 and you have already probably noticed some of these trends pick up in the industry.
Here are five. trends to watch out for in the payments industry:
1) A rise in Innovative Payment Products
With everything going around globally, people today are trying to go contactless in every possible area.
According to the National Retail Federation, 67% of the US retailers now accept some form of contactless payment. In Europe, Visa reports that 75% of in-store payments are now contactless. Not only this, but according to Masterclass, In March 2020, UAE recorded 100% growth in contactless payments than last year.
As a result, you would notice a boom in NFC (Near-field communication) EMV, the technology that powers contactless payments. It allows users to wave or tap on their smartphones to make a payment; thus, things like tap and go QR codes and contactless cards would become more popular than ever. Even devices like smartwatches and smart speakers that allow you to execute payments in the same fashion could become widespread.
Tech companies like Apple, Samsung and Google already have their respective contactless payments, and the same trend may spill over to MENA.
2) Focus on stronger security
It is understood that anything on the web is prone to cybersecurity threat; hence now that digital payments seem to be the way to go forward, it's essential that we also focus on security as we embrace it.
Payment companies, in the forthcoming future, will focus significantly on improving their existing cybersecurity framework. In doing so, AI (Artificial Intelligence) and ML (Machine Learning) powered systems may take the lead. 44% of the companies already use these technologies to detect and prevent security intrusions, as per TCS.
Additionally, the CA (Customer Authentication) process may also become critical to add a different layer of security to payments. Facial recognition, biometric and voice-enabled payments being essential factors in ensuring a robust CA process.
3) Integrated Payments
Earlier, there was a clear distinction between financial service providers and merchants. Today, merchants are integrating payment services on their platforms.
The entire point of integrated payments is to offer a seamless checkout experience for customers. They do not expect payment to be a separate part of the exchange but rather think of it as a part of the trade and thus want to avoid extra steps for its completion.
Hence Merchants can easily activate PIS (Payment Initiation Services) on their platform. It allows them to directly interact with their customer's bank via open API and execute transactions with prior consent.
According to Accenture, 50% of adults are comfortable letting third party's initiate payments on their behalf.
4) B2B Payments Redefined
With all the advances in FinTech and Payments being centred mostly around everyday lives, the B2B payments sector has gotten left behind. We forget that people in B2B are the same people in daily lives with access to top-class financial services and that the fractured B2B experience makes them go irked.
Hence, the payments industry needs to shift gears and bring about the same level of quality, security, and speed to B2B payments. In the forthcoming future, we can expect a significant focus on personalisation, customisation and speed in B2B, especially as the need for it continues to grow.
We may also expect integrated payments to become popular for this set since B2B tech platforms contribute to a significant chunk of B2B transactions every year and still don't make money on them. Integrated payments will allow them to connect with payment facilitators and take a revenue cut from the transaction cost.
5) Evolution of P2P payments
Since the pandemic, the audience for P2P payments has broadened from tech-savvy millennials to even the older generation. Platforms like PayPal, Razorpay have grown in popularity and seen a surge in their average transaction volumes.
The next step for them may, however, be to expand their offerings and increase revenue. Many payment platforms already provide additional services like investment and trading, cryptocurrency transactions and debit card offerings. They are heading to become almost like a bank.
The same trend might transcend across platforms as the business opportunity keeps growing because of mass user attention.
The Rise of Payment Services in MENA
That being said, the payment industry might especially see an uptrend in the Middle East as the Gulf Cooperation Council is heavily promoting the adoption of digital payments. Additionally, there is also a vast opportunity in North Africa because of easy accessibility to such services.
More so, the population in this region is tech-savvy, with approximately 30% falling under the age bracket of 15-29. With all the odds being in the region's favour, millions of dollars are invested in VC funding in startups that function in the area. And, We, as partners of some of the FinTech and Payments companies in the region, have sensed the growth of it.
So the near future for payments seems to be shaping up with innovative ideas and technologies along with the growing opportunity in the regions like MENA.
Ankur Mishra is COO of PayNet Systems, one of the leading digital banking and payments solution provider. He is a visionary leader whose flamboyant management style has given profitable results for the company. He believes in the mantra of giving 100% to his work.