A whole range of buzzwords appear on the trend radar for digital payments – from biometric payments to digital wallets, tokenization, and digital central bank currencies (CBDC) to current risk analysis techniques and real-time payments. Prioritization is necessary to retain a proper overview: The topics “identification and authentication in banking”, “transaction risk management”, “open banking”, and “e-commerce network tokenization” are currently the forerunners.
POWER topics with growth potential
In a study, the bank J.P.Morgan identifies five areas that will decisively influence the future of payments: platform, online, wallets, embedded, and real-time – in short: P O W E R. “Embedded” is about embedding payment methods into more and more purchase processes and devices, for example in connected cars or wearables, for the smoothest possible user experience. Additional services that add value to the processing of transactions also play an important role. The bank sees enormous growth potential here.
J.P. Morgen sees further growth potential in e-commerce: „$5 trillion in annual global retail sales shifted from offline to online due to the pandemic, and the shift is likely to stay. For instance, in 2020, about 40% of online grocery shoppers were first-time users, of which 90% had a positive experience and were likely to come back.”
Customers, as well as Netcetera experts, identify the following trends in e-commerce: In the “online" area, the authentication methods, which have previously differed between online banking and online payment, will merge in the future. 3-D Secure will remain the preferred technology. In the foreseeable future, biometric methods based on FIDO (Fast Identity Online) standards will be used for authentication.
Digital wallets are catching on
The management consultancy PricewaterhouseCoopers (pwc) sees six overriding trends that will determine the future of payments. This includes, above all, the increasing use of digital wallets. The consultancy company expects mobile payment methods to grow by around 23 percent annually by 2024. Acceptance of wallets will be driven by QR codes and open banking, among other things. Simplicity and convenience mean that digital wallets will become the preferred point of contact, replacing previous banking interfaces and cards. The initiation of payments will also move away from cards and accounts to digital wallets.
However, this will not automatically lead to so-called Big Techs entities such as Apple or Google dominating customer interfaces and banks losing direct contact with their customers. To avoid this, banks must be able to react dynamically to changes in competition.
How the importance of cards will change in the payment mix is also the subject of the current" FIS Worldpay Global Payment Report". For e-commerce in Europe, the report expects annual growth of an average of 14 percent by 2025, with cards only recording a growth of 11 percent on average. This means that the market share of cards in e-commerce will decline from 43 percent in 2021 to 38 percent in 2025. At physical POS, card market share is expected to decline from 61 percent to 57 percent over the same period. Of all payment methods at the POS, the report believes that the greatest opportunities for growth lie with mobile wallets and BNPL (Buy Now Pay Later, e.g., payment on account or installment purchase).
The decisive question from our point of view will be how payments via a wallet or BNPL procedures will be “funded” in the future. I.e., will the means of payment in the background be a card or an account? Therefore, it is also important to understand how payments via account transfer will develop.