The shift to buying online has shown us all that having fast, secure options to make electronic payments has never been so important. Worldpay and FIS have suggested that by 2024 only 7% of all purchases in the UK will be made with cash. Here are seven key areas where we’re expecting to see rapid developments and growth in 2022 and beyond.

Digital wallets are growing in popularity

Digital wallets make it fast and easy to make secure payments without having to get your card out of your wallet every time. Smartphone users don’t even have to choose and download one, as Android, Apple and Samsung all have their own built in (Google Pay, Apple Wallet and Samsung Pay respectively). Digital wallets may also provide a solution for the unbanked; New York State are hoping to create an e-wallet that can be used by the 8% of their citizens who don’t have a bank account. By 2023 more than half of all e-commerce transactions globally are expected to be made with a digital wallet according to a report by Worldpay. Juniper Research forecasts that the value of global e-wallet transactions will exceed $10 trillion by 2025, up from $5.5 trillion in 2020.

The rise and rise of Buy Now Pay Later

In the last couple of years, interest-free payment apps like Klarna and ClearPay have been popping up at digital checkouts everywhere. Monzo are doing it, Revolut are planning it and some of the traditional banks are also thinking about it. Jupiter Research believe that BNPL spending will be worth £37 billion in the UK by 2026. BNPL is popular with younger shoppers, but it’s unregulated and only some of the schemes involve credit checks. The danger is that a few small payments per month soon add up and some people may be tempted to take on more debt than they can afford. Regulation is sure to come in – hopefully before some of these services find themselves in hot water from irresponsible lending.

Voice-activated payments begin to be heard

VibePay are banking on voice-activated to be key in the future of payment technology. They've become the first company in Europe to offer account-to-account voice-activated electronic payments. CEO Luke Massie spoke of his wish to match the quality of services offered by WeChat, CashApp, Alipay and Venmo around the world and offer the technology in Europe. New research by leading global payments provider Paysafe found that 57% would use voice-activated technology to pay for low-value goods and services. But customers would need to gain confidence to use it for large purchases. Just 18% are happy to pay for a holiday or book flights using voice recognition. Voice payments are quick, easy, and convenient, with no passwords or numbers to remember, but there are challenges to overcome, for instance privacy issues, security concerns and systems being able to understand accents.

Not-so-new kid on the Block

Is blockchain the future of digital payments? Ex-Twitter CEO Jack Dorsey seems to think so, announcing in June 2021 that he’s now focusing on the digital payments business he co-founded in 2009. The company formally known as Square has been rebranded as Block and encompasses other businesses including decentralised bitcoin exchange tbDEX and Square Crypto, newly renamed Spiral. Offering speed and transparency with no fees and no need to share personal information, blockchain technology has plus points for consumers and could completely change the landscape of digital payments. Block is already developing a wallet to store bitcoin and working on a bitcoin mining system. And the business is hardly starting from nothing – it’s already worth nearly three times as much as Twitter.

El Salvador banks on crypto…

In September 2021 El Salvador made bitcoin legal tender. The small central American country took the decision for several reasons: 70% of people are unbanked and a fifth of the country’s GDP is made up of people sending money home from abroad. The idea is that bitcoin will allow them to access financial services and reduce the high fees they pay when sending money. But bitcoin is known for its volatility and it’s a huge risk for the citizens of this poor and historically unstable country. Bitcoin has advocates in Paraguay and Panama, but they will likely watch El Salvador's experiment for a while first before making any decisions to go the same way.

…while other countries create their own digital currencies

Elsewhere, Venezuela, Tunisia, and Senegal as well as the city of Dubai have created their own Central Bank Digital Currencies. These are digital currencies controlled by central banks and operating alongside traditional currencies. Sweden, Russia, and Israel are soon to join them, and El Salvador’s near neighbours Honduras and Guatemala are also considering CBDC ventures. CBDCs offer some of the advantages of cryptocurrencies, including cheap, secure, transparent transactions and the ability to be used by the unbanked. But as they’re controlled by a central bank would not come with the high level of privacy offered by crypto.

New fintechs are springing up in emerging markets

Tech consultancy Omidia are forecasting a 5.8% rise in debit/credit card holders in the Philippines and a 5.5% rise in Indonesia by 2024. It’s being driven by the pandemic, government drives to improve access to bank accounts and a young, tech-savvy audience. This move towards electronic payments presents opportunities for fintech businesses. But the established players in the West better move fast if they want to get involved. New fintechs are springing up in emerging markets, embracing technology and unencumbered by tradition and history.

Electronic payments are a cornerstone of financial services transformation. There won’t be just one solution; people expect choice and are likely to want to use a range of solutions depending on what they’re doing and what channel they’re using. But what will unite all successful solutions is speed, security, and convenience – today’s consumers won’t expect anything less.

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