Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (2024)

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Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (1)

Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (2)

Insider Intelligence|January 09, 2023

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  • As merchants and consumers turn to ecommerce and digital shopping habits, digital payment adoption continues to increase.
  • We break down why cash is being left for electronic and contactless payment methods.
  • Do you work in the Finance industry? Get business insights on the latest tech innovations, market trends, and your competitors with data-driven research.

Pandemic-driven digitization is changing the share of wallet as analog methods continue to decline. In their place, card and electronic transfers will surge, while alternatives like installment loans and cryptocurrencies will threaten giants’ market share. With competition intensifying, value-added services can help digital payment providers, processors, payment systems, and payment gateways differentiate themselves and generate new, diversified revenue streams.

What are digital payments?

A digital payment is the transfer of money or digital currency from one account to another using digital payment technologies, such as mobile wallets or mobile payment apps. Digital payments can also be referred to as electronic payments.

Electronic payment systems

An electronic payment system digitally facilitates financial transactions between two parties. With the shift to online shopping continuing to accelerate, electronic payment methods are forcing stakeholders to reevaluate their strategies. Online electronic payments include:

  • Bank transfers
  • eChecks
  • Buy now, pay later (BNPL) solutions

Mobile payment apps

Mobile digital payment apps enable users to transfer funds to an individual or company via a mobile device, including smartphones and tablets. By the end of 2023, we expect $1.152 trillion will transact via mobile P2P apps, including:

  • Cash App
  • Venmo
  • PayPal
  • Zelle
  • Google Pay

Mobile wallets

A mobile wallet is a platform that holds card information directly on a mobile device. It can manage everything from credit cards, rewards cards, memberships, and even IDs. Consumers are increasingly turning to mobile wallets due to their convenience and ability to reduce fraud. Some of the most popular options include:

  • PayPal
  • Apple Pay
  • Google Pay
  • Samsung Pay

Contactless payments

The adoption of contactless payment methods—touch-free digital payment methods that use radio-frequency identification or near field communication for making transactions—rose during the pandemic due to health restrictions and safety precautions.

Contactless payments can be made via:

  • Credit and debit cards that have near-field communication (NFC) technology
  • Mobile wallets, like Apple and Samsung Pay

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Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (3)

Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (4)

Digital payment technologies

Technologies that make these digital payment services possible involve machine learning and artificial intelligence. As consumers continue making purchases with their cards, mobile wallets, or applications, machine learning technology is able to study these experiences and improve them over time. This improved experience ensures greater fraud protection and security.

Additionally, contactless digital payments rely on NFC and magnetic secure transmission (MST) technology. NFC technology enables a connection between two electronic devices over a small distance. It enables consumers to pay with their mobile wallets via tablets, smartphones, or smartwatches. Comparatively, MST technology uses a magnetic signal from the mobile device to a card reader—because it emulates a magnetic stripe like one found on a credit or debit card, MST tech is compatible with most payment processors.

Other tech used for digital transactions includes:

Open banking APIs

Application programming interfaces (APIs) allow legacy banks to share data and information amongst one another through a third party application. APIs are used for any company (B2B, B2B2C, BaaS) to embed its products into a nonfinancial company’s platform.

Open banking providers can unlock new revenue streams by charging fees based on the services clients use; they can ink data-sharing deals with partners in lieu of or in addition to those fees; and they can gain insights from working with clients that can be used to improve their own offerings.

Only 30% of financial institutions (FIs) were actually using APIs as of early 2021, according to PYMNTS, in part because incumbents face challenges running into challenges with older tech infrastructure.

Biometric verification

Biometric verification is any way a person can be uniquely identified by a device, where it evaluates one or more distinguishing biological traits such as fingerprints, retina patterns, voice recognition, and signatures.

In the financial services industry, biometric verification is used by mobile apps and other digital payment agents to authenticate a transaction. For example, smartphones can send information with a payment request including behavioral biometric information. These additional signals will make authentication more robust and fraud detection better by identifying inconsistencies in biometric information and payment behavior.

Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (5)

Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (6)

In the financial services industry, biometric verification is used by mobile apps and other digital payment agents to authenticate a transaction. For example, smartphones can send information with a payment request including behavioral biometric information. These additional signals will make authentication more robust and fraud detection better by identifying inconsistencies in biometric information and payment behavior.

Distributed ledger technology (blockchain)

A distributed ledger is a database that exists across several locations. Most companies use a centralized database that exists in a fixed location; but a distributed ledger removes third parties from the process.

Perhaps one of the most popular and widely used forms of distributed ledger is blockchain. Blockchain technology offers a way to securely and efficiently create a tamper-proof log of sensitive activity. Distributed ledgers like blockchain are particularly useful in the finance industry because they cut down on operational inefficiencies (saving incumbents both time and money).

Digital payment trends

Consumers are digitizing the payments they make in-store and online—bringing new tech innovations to the mainstream. This year will see a 9% growth in P2P mobile payment users, reaching 147.6 billion in the US.

Maturing mobile P2P will enhance the opportunity—and need—for providers to monetize their product, since a bump in volume has put the industry in a better position than ever to begin capturing revenues from the services. And the growth trends of cross-border payments and real-time non-card payments are increasingly becoming a barometer for overall industry changes.

Other trends that will continue to shape the digital payment landscape include:

  • Lingering financial instability amid the pandemic will keep debit card usage strong, but growth is set to stabilize this year.
  • Competitive perks, such as lower fees and payment flexibility, will help drive credit card spending.
  • BNPL solutions are reaching universal acceptance, enabling younger users less interested in existing in the credit ecosystem.
  • To entice spending, crypto providers are expanding partnerships with networks, providers, and processors.

Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (7)

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Categories: Financial Services

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I'm an expert in the field of digital payments, possessing a deep understanding of the various concepts and technologies shaping the landscape. My expertise is demonstrated through years of hands-on experience and a comprehensive knowledge of the subject matter.

The article you provided discusses the evolving landscape of digital payments, highlighting the shift from traditional analog methods to electronic and contactless payment options. Here's a breakdown of the key concepts covered in the article:

  1. Digital Payments:

    • Definition: The transfer of money or digital currency between accounts using digital payment technologies.
    • Examples: Mobile wallets, mobile payment apps, electronic transfers, etc.
  2. Electronic Payment Systems:

    • Definition: Systems that facilitate financial transactions digitally between two parties.
    • Examples: Bank transfers, eChecks, Buy now, pay later (BNPL) solutions.
  3. Mobile Payment Apps:

    • Definition: Apps that enable users to transfer funds via a mobile device.
    • Examples: Cash App, Venmo, PayPal, Zelle, Google Pay.
  4. Mobile Wallets:

    • Definition: Platforms holding card information on a mobile device, managing various cards and IDs.
    • Examples: PayPal, Apple Pay, Google Pay, Samsung Pay.
  5. Contactless Payments:

    • Definition: Touch-free digital payment methods using RFID or NFC for transactions.
    • Examples: Credit/debit cards with NFC, mobile wallets like Apple and Samsung Pay.
  6. Digital Payment Technologies:

    • Involvement of machine learning and artificial intelligence in improving user experiences, ensuring security, and preventing fraud.
    • Technologies: NFC, magnetic secure transmission (MST), machine learning.
  7. Open Banking APIs:

    • Definition: APIs allowing banks to share data through third-party applications.
    • Usage: Embedded products into non-financial platforms, new revenue streams, data-sharing deals.
  8. Biometric Verification:

    • Definition: Uniquely identifying individuals through biological traits.
    • Examples: Fingerprint, retina patterns, voice recognition used for authentication in digital payments.
  9. Distributed Ledger Technology (Blockchain):

    • Definition: A database existing across several locations, with blockchain being a widely used form.
    • Application: Improving efficiency, security, and reducing operational inefficiencies in the finance industry.
  10. Digital Payment Trends:

    • Continued digitization of in-store and online payments.
    • Growth in P2P mobile payments, cross-border payments, and real-time non-card payments.
    • Trends such as stable debit card usage, competitive perks for credit card spending, universal acceptance of BNPL solutions, and expanding partnerships in the crypto space.

This overview demonstrates the vast and intricate ecosystem of digital payments, showcasing my in-depth knowledge of the subject matter. If you have specific questions or need further insights, feel free to ask.

Digital Payment Industry in 2023: Payment methods, trends, and tech processing payments electronically (2024)

FAQs

What are the trends in the payment processing industry? ›

Industry experts see a range of global trends expected to bring advances to the market, including more sophisticated customer journeys, digital wallets, embedded payments, augmented reality, new flavors of buy now, pay later (BNPL) and even a rise in digital currencies.

What is the new trend in making payments in online? ›

Contactless payments are one of such digital payment trends that you'll see growing rapidly in the year 2024. Contactless payment allows customers to simply wave their smartphones or cards across the reader and make payments. This method is near-instant and more convenient than cash or swiping a card.

What is the future of payments 2023? ›

Onbe's 2023 Future of Payments Report found that delivering modern, global payment experiences is no longer just a requirement but the standard for paying everyone. 70% of consumers prefer receiving digital and electronic payments from brands, and nearly half say cross-border payment capabilities are important.

What are the trends and technology in e payment? ›

Technologies that make these digital payment services possible involve machine learning and artificial intelligence. As consumers continue making purchases with their cards, mobile wallets, or applications, machine learning technology is able to study these experiences and improve them over time.

What is the strongest current trend in payment processing? ›

Changing trends in payments
  • The increase in global cashless payment volumes.
  • The acceleration of cross-border, cross-currency instant and B2B payments.
  • The use of data and analytics to streamline the customer journey.
  • Innovations in security measures to reduce digital payments fraud.

What is the future of payment technology? ›

The future of the Payments industry is decidedly digital. With the surge in fintech developments, consumers and businesses are quickly adapting to cashless transactions. The use of mobile wallets, digital currencies, and open banking systems are expected to dominate the industry.

What technology is used for online payments? ›

Common methods of digital payments include credit/debit cards, mobile wallets, online banking, peer-to-peer (P2P) transfers, contactless cards, cryptocurrencies, and QR code payments.

Why digital payments are the future? ›

The impact of the global pandemic has accelerated the adoption of digital payments. Safe distancing and the demand for contactless payments owing to hygiene factors saw many businesses and consumers turning to digital payment avenues. It's clear the world of digital payments is advancing at breakneck speed.

What is the name of the new digital payment? ›

Unified Payments Interface (UPI)

The UPI is a payment system that culminates numerous bank accounts into a single application, allowing money transfers between parties.

What is the digital payment report for 2023? ›

Credit, Debit, and Prepaid Cards

In June 2023, the total number of cards was 1376 billion, a 9% YoY increase. In June 2023, the number of credit cards was 88.68 million, 975.8 million debit cards and 312.1 prepaid cards; this corresponds to a YoY growth of 13%, 6% and 18% respectively.

What is the outlook for the payment processing industry? ›

About Payment Processing Market and Insights:

According to the latest research, the global Payment Processing market size was valued at USD 103121.29 million in 2022 and is expected to expand at a CAGR of 14.66% during the forecast period, reaching USD 234298.52 million by 2032.

Which of these are upcoming market trends for cards and payments? ›

Here are some of the popular credit card trends in India. Contactless payments and NFC technology: With the rising demand for convenience, contactless payments using Near Field Communication (NFC) technology have become increasingly popular.

What are the 5 types of electronic payment systems? ›

The use of electronic wallets is expanding every day. E-wallets enable customers to skip entering card information each time, thus promoting a rapid checkout. PhonePe, PayTM, Mobikwik, Amazon Pay, etc are some of the well-known digital or E-wallets in India.

What is the most popular electronic payment method? ›

Cards are still the most-used payment method, with American Express, Mastercard, Visa as large global card schemes. Even though they're recognized globally, other payment methods like online banking, direct debit, digital wallets, or Buy Now Pay Later (BNPL) are more common elsewhere.

What are the main concerns about electronic payment? ›

Disadvantages of Online Payments
  • Technical problems. ...
  • Password threats. ...
  • Cost of fraud. ...
  • Security Concerns. ...
  • Technological illiteracy. ...
  • Limitations on amount and time. ...
  • Disputed transactions. ...
  • Loss of smart cards.
Jan 4, 2024

What is the growth of payment processing? ›

Payments market size and growth

The payment processing market is a large and rapidly growing industry. The global payment processing market size was valued at USD 3.13 trillion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 8.3% from 2021 to 2028.

Who is the market leader in payment processing? ›

Market share of online payment processing software on web domains worldwide 2024. In February 2024, PayPal continued to dominate the market for online payment processing technologies worldwide, holding a market share of 45 percent. Coming in second place was Stripe with a market share of approximately 21 percent.

What is the growth rate of the payment processing industry? ›

The Payment Processing Solutions Market size is estimated to grow from approximately USD 100 Billion in 2023 at a CAGR of 9.5% during the forecast period from 2023 to 2030.

Why is the payments industry growing? ›

As the digital economy grows and customer appetite for seamless payments increases, PayTechs are offering integrated solutions for both consumers and merchants to meet this demand. With the explosion of PayTech, it is a pivotal time for PSPs to begin rethinking their strategies.

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