Digital payment services and platforms have been taking the world by storm in the past few years, and this trend is expected to grow even further in 2022. Digital payment, also known as electronic payment, refers to the transfer of money or digital currencies between different accounts using digital platforms such as mobile wallets and payment applications.
An electronic payment, or e-commerce payment system, is any platform that allows two parties to make these financial transactions via the internet. Companies and stakeholders are being compelled to reconsider their strategy as the transition to online transactions accelerates electronic payment options. Additionally, as competition heats up, value-added services may help digital payment providers as well as retailers distinguish out and establish new, diversified revenue streams.
In the past two years, with the COVID-19 pandemic, lockdowns, and quarantines, several factors that include the widespread adoption of online shopping and the increased care with sanitary measures have accelerated the transition towards all sorts of digital payments. Unsurprisingly, the total volume of digital payments has continued to increase at an incredible pace, surpassing in 2021 the $4.1 trillion mark.
With multiple industries, as well as consumers, continuously shifting to online marketplaces and digital shopping habits, the adoption of digital payment keeps rising, especially among the younger generations (notably, millennials), who have completely embraced digital wallet services, contactless payment, peer-to-peer payment applications, and many other platforms.
Quick transition
Several markets that have always been known for pushing for innovations and technological advancements, have been quickly adopting digital payments to attract new generations of customers. E-commerce is obviously the sector that has benefitted the most from this new trend, but retailers in general have been impacted by it. The adoption of digital payments can also be seen in the online entertainment industry, especially in the video games and iGaming sectors, as gaming marketplaces and even newly-launched iGaming platforms have begun to accept these services as means of payment.
“Shoppers continue to look for easier ways to tap into mobile wallets, digital gift cards, rewards and loyalty points, and as a result, are increasingly seeking retailers that have embraced digital and contactless payments,” said Theresa McEndree, global head of marketing at Blackhawk Network, a global digital payment provider. “Our research shows that consumers around the world are drawn to retailers that offer fast, seamless and secure digital payments. As we start to hit more of a stride in our economic recovery, the winners will be the merchants that cater to the everyday digital payment preferences of today’s shopper.”
Banking institutions and corporations from a variety of industries made digitization a top priority in 2020 and 2021, and this move is resulting in the emergence of digital payment platforms all over the world. Consumers are digitizing their in-store and online purchases as well, bringing in new technologies like contactless payments and digital wallets. Apps like Venmo and Zelle have grown in popularity, according to industry reports, with volume reaching around $400 billion in 2020 as a result of massive user growth.
Mobile payment apps
Mobile digital payment apps allow the transfer of money between users and companies using mobile devices such as smartphones and tablets. Leading P2P providers reported a double-digit surge in monthly app downloads in 2020, a trend that continued into last year, with 30 percent of individuals in the United States signing up for new P2P platforms in the first half of 2021.
These applications are enabled by a variety of technologies, including machine learning and artificial intelligence. As customers continue to use payment applications to make purchases, machine learning technology can investigate and improve these experiences. This improved user experience ensures fraud protection and increased security.
Cash App, Square Cash, Venmo, and Zelle are among the most popular mobile payment applications, and even Meta, Facebook’s parent corporation, has entered this new market.
Digital wallets
A digital wallet is a payment platform that stores users’ credit or debit card information and can be used on mobile devices and personal computers. These wallets are capable of processing credit cards, rewards cards, and memberships, among other features. Consumers are increasingly turning to mobile wallets due to its convenience and potential to decrease fraud.
According to market research, by September 2020, 76% of customers claimed they had increased their use of this payment method, with 43% indicating they had increased it significantly.
Generation Z is more likely to use digital wallets such as Apple Pay, PayPal, and other P2P services; this age group uses these platforms considerably more than other generations and is quickly catching up to older consumers in their adoption of other digital payment services.
