The last decade for payments has been extraordinary and the narrative surrounding payments is shifting. Over the next decade, payments will continue to connect people, devices, homes, cars and avatars spanning physical, digital and virtual worlds. No longer just financial transactions, the payments industry is today a comprehensive ecosystem of financial and lifestyle services and a network of connectivity and data exchange.
In a world where US$300 trillion in global payment flows now exists approximately $80 trillion can be attributed to five mega-trends: Platforms, E-Commerce Embedded Finance; Wallets and Real Time Payments with cashless uptake worldwide expected to increase by 200% by 2030.
We are witnessing a sea change in payments that will likely transform our understanding and experience of commerce and financial services. There is a plethora of daily developments and technology advances influencing this transformation, but in the coming years, a few trends are likely to be the key drivers.
The first of these is the rise of so-called ‘super apps.’ Already, these, are a destination platform for consumer and merchants to aggregate a range of services and financial tools, have attracted global payment volumes of around $36 trillion, in the process massively disrupting traditional retail models and reshaping the world’s banking and financial systems.
Super apps offer a seamless experience, integrating various lifestyle and financial services with in-app payment functionalities. Most of these apps make transactions as simple as a swipe or tap, allowing them to quickly contribute to financial inclusion, break down barriers, and reduce friction in ways that traditional banking processes have been trying to do for years.
In a similar vein, embedded finance is poised to proliferate international financial systems and markets in the coming years. By conveniently integrating financial services into non-financial platforms, embedded finance technology is set to usher in dynamic new integrated business models that seamlessly bring together every aspect of consumers’ lives. Small wonder, then, that this trend is attracting significant interest from a broad cross-section of businesses and industries, from retail to telecoms.
Another significant trend that is set to shape payments is the rapid rise of e-commerce as the new business norm.. The ultimate goal of organisations that are embracing this e-commerce trend is to build a seamless and secure customer experience that spans a range of platforms. Trend analysts predict that this may culminate in a universal digital identity verification service that could revolutionise the way we think about data and personal identity.
The stellar growth in the gig economy has elicited projections that this transformative way of working could result in transaction volumes of around US$455 billion by the start of 2024. Most of these will be innovative payment solutions designed to cater to unique needs of gig economy participants who require quick payments and effective platforms through which to process largely fragmented and irregular income flows. Similarly, the burgeoning creator economy is driving the unbundling of large platforms, with specialised payment providers emerging to serve new categories of earners.
Another key payment growth and transformation driver is digital wallets. Boku’s 2021 mobile wallet report puts the number of digital wallet users around the world at around 4.8 billion by 2025. If that’s the case, these virtual wallets are projected to be handling transactions to the value of over $12 trillion by 2026.
digital wallets may have originated as substitutes for physical wallets, their potential as convenient transactional vehicles and value stores has seen them quickly evolve into smart, integrated, full-function financial platforms that are fundamentally changing the way people and businesses transact. The ongoing evolution of wallets leads to interesting question about where their future is heading as a transactional store of value.
Parallel to this growth in digital wallets, demand for real-time payments is also set to soar in the coming years, with Verified Market Research (VMR) predicting CAGR of over 30% from 2024 to 2030. Whether its businesses making cross-border payments or workers sending remittances to loved ones in other countries, the ability of real-time payments to provide instant access to funds and seamless end-to-end communication will see them increasingly becoming pivotal in shaping the future financial landscape.
While all of these trends will undoubtedly transform payments globally in 2024 and beyond, one trend is set overshadow them all. From connected cars to wearables, the devices we use daily are rapidly becoming our new payment platforms. A decade ago, it would have been difficult to imagine using your watch to pay for your groceries or having your car automatically settling your tolls.
But today, wearables are an acceptable form of payment device and it’s estimated that by 2030, around 95% of new vehicles sold will be digitally connected, presenting a massive opportunity for financial services and other industries to integrate and innovate.
And when you add the stellar rate at which virtual worlds and augmented reality are becoming a part of mainstream lifestyles, the opportunities for transforming these online spaces into transactional environments are infinite.
By 2025, revenue in these spaces is expected to reach $390 billion and, as we move rapidly towards widescale acceptance of the metaverse, the evolution of a second, entirely virtual, economy seems inevitable. It’s exciting to believe that just a few short years ago, the only way to move money on the same day was to deliver it yourself. Today, real-time digital payments and transfers, that are secure and virtually cost-free are a reality. And we’re only seeing the very tip of the iceberg.
The next decade is poised to revolutionise the payments landscape, not merely through the extension of what we’ve already seen, but in ways we haven’t yet imagined. The new era of financial services is upon us – and payments are leading the way
By Hipo Mushwana; Executive, Emerging Innovation, Nedbank Retail
