They were first introduced through the creation of credit or debit cards. These physical cards allowed consumers to spend money without needing cash.
Advances in mobile technology led to online banking apps, mobile wallets, and contactless payments. These methods are even more convenient and are transformative for commerce, online and in physical outlets.
Throughout 2024, there are ten key trends expected to rise as digital payments evolve:
1. Rise of cryptocurrencies in everyday transactions
Cryptocurrencies, or crypto, are digital currencies maintained by a decentralised blockchain system rather than any government or institution. Owning a crypto means possessing assets that are not tangible, hence it is more popular as an investment currently.
Many platforms are gradually integrating crypto into their financial ecosystem. For example, PayPal — the online payment giant — allows users to buy, hold, and sell crypto.
Despite its volatility issues, crypto is predicted to keep growing. It offers fast transactions, easier cross-border payment, and lower transaction fees than traditional methods.
2. Biometric Authentication
The security concerns surrounding digital payments are unchanged, but the method for securing them is improving all the time. This has led to widespread growth in biometric authentication. Biometric authentication allows for more security and convenience than traditional passwords and PINs, which can be forgotten or stolen. It makes impersonation far more difficult.
Biometrics requires users to input unique physical characteristics like fingerprints or facial features (via a camera). Approved in an instant, consumers can make payments easily by verifying with the tap of a finger or by staying still for the camera.
3. Growth of Peer-to-Peer Payments
Peer-to-peer payment apps allow users to send money directly to another user using a mobile device. The convenience of this payment mode made it popular.
Among the most used apps are Zelle, Venmo, and Paypal. Zelle, for instance, gained $307 billion in transactions in 2020, 58% growth on the previous year, and part of a wider trend in digital payments growth during the Covid-19 lockdowns.
This method offers instant transactions advantageous for time-sensitive transactions like splitting bills or sending emergency funds. It also commonly has a low-cost or free transaction compared to traditional banking options.
4. AI fraud detection with digital payments
AI technology has greatly impacted many sectors, including digital payments. Fraud detection with AI is a solution that uses algorithms to analyse large transaction data. This AI tool can recognise suspicious patterns and identify discrepancies that indicate fraudulent activity.
Companies like Visa introduced AI fraud detection this year. The AI-powered security tools are included in the Visa Protect suite. The fraud detection tool, including digital wallets, can be used for immediate payments.
5. Real-time payments (RTP)
Real-time payments make immediate transactions between accounts significantly better than traditional banking systems, which might take days. This is a preferred option for both consumers and businesses.
Businesses can improve cash flow with faster payments, and consumers can access funds immediately. Currently, the RTP frameworks continue to be adopted by worldwide financial institutions. It is expected to be the standard for various transactions, including payroll and cross-border payments.
6. Voice-activated transactions
Voice-activated payment is an innovative method for users to do transactions simply using speaking commands. A payment system such as this can be more convenient for users than the common typing password method.
This form of authentication is possible through voice recognition tools used in mobile apps. Additionally, voice-activated payments offer a high level of security and a smoother consumer experience. As more companies adopt this trend, it is expected to become even more popular in 2024.
7. QR code payments
QR code payments uses a unique QR code that smartphones can scan to authorise transactions. It is usually connected to consumers’ mobile banking apps or mobile wallets as the source of payment.
This contactless payment offers a seamless payment experience that is highly desirable for users. Businesses also benefit from the simplicity of the method by making transactions faster and seamless.
8. Cross-border payments
Cross-border payments are expected to grow consistently as the world moves on from the restrictions of the COVID-19 pandemic. Also, more businesses are engaging in cross-border payments, and 80 percent expect a transaction volume increase in the next 12 to 24 months.
International payments often suffer from high fees and lengthy transaction times. However, companies are expected to improve their capabilities as cross-border payments increase.
9. Buy Now Pay Later (BNPL)
Buy Now Pay Later (BNPL) services are a more accessible of borrowing for payment than traditional methods like credit cards.
They allow consumers to make purchases and spread the cost over time. This method enables minimal or zero percent financing and no initial credit check.
Many e-commerce platforms have integrated these payment system as they become more popular.
10. IoT devices integration for digital payments
Integrating Internet of Things (IoT) devices with mobile payments helps make the consumer experience more convenient. This innovation allows wearables and smart home appliances to make contactless payments.
Furthermore, IoT devices can also generate data that can be analysed to create a more personalised experience.
- Digital Payments
