There are some things we just cannot predict. For instance, who knew, back in early 2020, that two years later the world would still be grappling with a pandemic? However, some things are easier to predict, including payment trends and how the industry will likely evolve. Experts at international professional services firm PricewaterhouseCoopers (PwC) looked into their crystal ball (or, more aptly, their storehouse of study data and other intelligence) and came up with an overarching view of how the payments industry will shake out over the next few years (through 2025), as well as identified several macrotrends they believe will shape it during that same time frame.
Let’s examine the generalities and several of the macrotrends, all of which merchants in every market should consider as they alter their payment acceptance strategies going forward.
A steady shift to digital payments—one that might ultimately lead to a cashless global society—was in the works even before the COVID-19 pandemic, according to PwC. Global cashless payment volumes are expected to increase by more than 80 percent during the period spanning 2020 to 2025, from about one trillion transactions to almost 1.9 trillion transactions, as well as to almost triple by 2030.
A larger, more profound change lies beneath this shift. Traditional methods of paying for goods and services, including paper checks and analogue invoices, are “set for radical transformation.” More importantly, the entire payments infrastructure is being reshaped, “with new business models emerging.”
The reshaping involves two big parallel trends. One trend is the evolution of the front- and back-end components of the payment system (instant payments, bill payments and requests to pay, and plastic cards and digital wallets). The other entails “huge changes” to the payment mix and ecosystem (the emergence of “buy now, pay later offerings, cryptocurrencies; and central bank digital currencies).
And now, the macrotrends—driven by a combination of consumer preference, technological evolution, emerging regulation, and other factors.
1. Increased financial inclusion and trust
Under the umbrella of the World Bank’s Universal Financial Access program, adults who were not part of the formal financial system were supposed to have been given access to a “transaction account” for storing money and sending and receiving payments. This has not been fully achieved, but there is now a growing focus on putting affordable, convenient payment mechanisms within reach, using smartphones coupled with “mobile money, wallets, and domestic and QR code solutions” to ensure “reach and low cost.” With smartphone penetration estimated to reach 80 percent globally by 2025, PwC analysts deem such an approach very viable but note that it will also require a push by solution providers and merchants to earn end-users trust and ensure the privacy of their data.
2. Spotlight on digital wallets
Digital wallets will be “increasingly pivotal as a payment ‘front end,’ as exemplified by Apple Pay, the relaunched Google Pay,” and others, according to PwC. In a report that covers the macrotrends, PwC analysts cite statistics from FIS. Such statistics indicate that globally, the use of digital wallet-based transactions rose by 7 percent in 2020 and will account for more than half of all e-commerce payments worldwide by 2024 as consumers transition from card-based to account- and QR code-based transactions.
The macro trends report also features findings from PwC’s “2025 and Beyond” survey. Of respondents to that survey, 45 percent “strongly agreed” that the near future will bring increased investment in mobile technology “beyond retail payments to support B2B payments and the digitalization of supply chains.”
3. Currency goes digital too
Digital currencies are gaining momentum: More than half (60 percent) of central banks are exploring them, and 14 percent are pilot-testing them. More likely than not, merchants will need to explore cryptocurrency acceptance.
4. Off the rails
Behind-the-scenes payment processing is changing as payment initiation transitions from cards and traditional accounts to digital wallets. Regulators will, as a result, “force the industry to strengthen, or build up, domestic infrastructure for payments,” according to PwC. Merchants will need to adjust not only to the new infrastructure and the use of alternative payment rails but also have in place technology and procedures to remain in compliance with any emerging regulations.
5. Across the border
Instant, low-cost payments are driving the reinvention of cross-border payments, and global standardization will enable domestic instant payment solutions to support cross-border payment connectivity. Global non-bank solutions based on cryptocurrency and digital wallets will also come to the forefront. These developments will facilitate merchants’ efforts to conduct business with entities and individual consumers outside the U.S.
6. Financial crime on the rise
Consumer adoption of instant and alternative payments, along with open banking, is sparking marked growth in the incidence of all types of fraud and financial crime. It is also given rise to increases in the average value of attempted fraudulent transactions, which rose by 70 percent in 2020 alone and remains on an uptick. Along with payment solutions and service providers, merchants will need to focus greater attention on wide-ranging initiatives aimed at defeating fraudsters at their own game.