The days of scrambling for loose change or swiping dusty credit cards are a fading memory. Today, a tap of your phone conjures coffee shop lattes, and a scan is enough to pay for parking. But the quest for payment perfection never ends. We crave not just frictionless transactions, but security tighter than a bank vault and flexibility that bends to our every whim.
In the current tech-fueled landscape, new payment solutions continue to rapidly emerge, each contending to make transactions faster, safer, and effortless.
As business owners, it is imperative to stay attuned to the latest trends in the payments space. It's not just about keeping pace, but about adapting, enhancing customer experiences, and revolutionising the payment ecosystem for everyone involved. With this in mind, let’s delve into the top payment trends to observe in the upcoming years.
I) Payments in Your Palms: Mobile Domination
1. Contactless Convenience Continues
The prevalence of smartphones has simultaneously driven the adoption of mobile payments. Giants like Apple Pay, Google Pay, and Samsung Pay have transformed shopping through technologies like near-field communication (NFC) and QR codes, enabling convenient and contactless transactions. Originally introduced in 1997 with Coca Cola's vending machine purchases via text message, mobile payments surged into a contactless revolution during COVID-19 for hygiene reasons. Beyond COVID, the convenience of tap-to-pay is driving its popularity, with over 50% of American shoppers preferring it.
India, in particular, has experienced a remarkable digital revolution with the introduction of Unified Payments Interface (UPI), simplifying financial access for millions. In 2023 alone, UPI facilitated over 22.7 billion transactions worth USD $768 billion, and it is expected to handle over 100 billion transactions in 2024 through use cases like international remittances, recurring payments, and integration with other platforms.
By 2024, the number of unique contactless mobile payment users worldwide is projected to reach 1 billion, with a projected 200% surge in contactless transactions by 2025. Recognising the growing trend, Reap introduced mobile payment capabilities last year, resulting in a remarkable month-over-month (MoM) growth in mobile transactions, surpassing the growth rate of physical transactions post-launch, with a 270% growth in mobile pay transactions observed in less than six months.
Mobile phones are becoming the ultimate payment companion, simplifying daily interactions with a touch. While developing economies have room for growth, the current mobile payments landscape promises innovation and expansion.
2. Embedded Payments Era
From ordering food via a delivery app to booking flights directly from travel platforms, embedded in-app payments are becoming an integral part of our daily lives, driven by the vision of a frictionless future. E-commerce platforms are incorporating embedded payments for one-click checkouts, while social media platforms are experimenting with built-in purchase options. The convenience and seamless experience offered by embedded payments are driving rapid adoption, eliminating the need for app switching, repetitive payment details, and cumbersome checkout processes. These capabilities, although still in the early stages, are gaining momentum, and global revenue from embedded payments is projected to reach nearly $60 billion USD in 2027, up from $32 billion USD in 2023 (Juniper Research).
Yet, the potential of embedded payments extends beyond one-click purchases. The future holds opportunities for hyper-personalisation, where recipe apps suggest grocery orders and travel apps automatically book activities tailored to our preferences, all with instant payment options. Our phones could become financial hubs, integrating embedded payments with budgeting tools and investment options, all within a single interface. The trend of embedded payments highlights the growing demand for seamless transactions, shaping consumer expectations, and prompting businesses to adapt. The future of commerce is intertwined with apps, providing a smooth and intuitive experience that keeps users happily engaged.
II) Beyond Traditional Money
1. Surge in Stablecoin Payments
Stablecoins, digital currencies tied to real-world assets, are rapidly becoming a dominant force in payments. By combining the efficiency and borderless nature of digital currencies with the stability of traditional financial systems, they’ve become a reliable and convenient medium of exchange worldwide.
Particularly in cross-border payments, stablecoins have gained popularity for their speed, cost-effectiveness, and safety. By eliminating intermediaries, transactions can be settled in minutes or even seconds, making money available 24/7 across borders. For instance, at Reap, nearly 20% of our clients who had not previously engaged with digital currencies utilised stablecoins for the first time in 2023 to make payments, thereby highlighting the growing recognition and acceptance of stablecoins' utility even among non-Web3 or traditional businesses. We also observed that nearly 30% of credit card repayments were conducted using stablecoins instead of fiat, signalling a growing preference for their usage. This accessibility, combined with increased adoption by those excluded from traditional banking, has propelled their use.
Even major players like Visa and Mastercard are integrating stablecoins into their networks. Partnering with Circle, Visa can now manage settlement payouts in USDC to Worldpay and Nuvei, helping speed up settlement times for their merchants. Additionally, to facilitate high-speed and low-cost transactions, Visa added support for Solana, becoming the first major payments company to directly utilise it for live settlement payments between clients. Notably, Juniper Research projects that global payments powered by stablecoins will exceed USD $180 billion by 2028, further solidifying their role in the future of payments.
Looking ahead, partnerships between crypto platforms and traditional payment processors hold great promise, enabling easier on-ramp and off-ramp for users, and facilitating crypto payments at established merchants.
2. Coming of Age: CBDCs
The concept of CBDCs isn't entirely new, but it's gained momentum in recent years. Fuelled by the rise of cryptocurrencies and digital payments, several central banks are actively exploring CBDCs to modernise payments and maintain control over their monetary systems.
Currently, many countries like Bahamas, Jamaica and Nigeria have already introduced CBDCs and more than 100 countries are testing CBDC functionality, with Brazil, China, India and the UK being at the forefront. More countries are expected to launch CBDCs in the coming years, with the potential for cross-border integration. CBDCs could disrupt traditional payment systems, potentially reducing costs and increasing speed and could expand access to financial services for unbanked populations.
Most central banks are still in the early stages of CBDC development. 2024 is likely to see more pilot programs and limited rollouts, focusing on specific use cases like cross-border payments or financial inclusion.
Looking Ahead
The payments landscape has undergone a noteworthy transformation in recent years, propelled by the rise of contactless transactions, embedded payments, and digital currencies. We find ourselves firmly entrenched in the digital decade, where convenience takes centre stage. As consumers increasingly seek instant gratification and seamless experiences, any trend that enhances convenience and simplifies their interactions is poised to become the new standard. However, the digitisation wave extends beyond payments alone. Customers now expect the entire financial experience to be digital with facilities like digital onboarding and automated KYC processes. It is imperative for companies to embrace these trends in order to provide a convenient and efficient experience at every customer touchpoint, fostering engagement and loyalty.
At Reap, we understand the importance of combining the reliability of traditional financial systems with the flexibility of digital assets to empower businesses in this modern, internet-enabled reality. Whether you are a digital-native enterprise or a traditional business adapting to the demands of today's environment, our mission is to orchestrate your success in this digital era and beyond.