Digital payment solutions are one of the best human inventions that have significantly impacted the finance industry. E-wallets, mobile payment apps, peer-to-peer (P2P) payment, cryptocurrency payment solutions, etc., have offered people new means of making payments beyond cash, checks, and cards.
People are accepting these digital payment solutions because of the convenience and security they provide. In the USA alone, approximately 69% of people used e-payments in 2023. This widespread acceptance of digital payment in a short time has significantly impacted the finance industry.
Overview of Digital Payment Solutions
Digital payment solutions are mobile applications, payment gateways, online banking, e-wallets, and more, that facilitate financial transactions digitally. People prefer e-payment solutions over conventional payment methods because of the speed, convenience, security, and efficiency these solutions offer.
Digital payment allows users to send and receive payments in real-time and conveniently. Moreover, these solutions provide insightful data that can be used by fintech innovators and researchers to create and offer personalized financial services and support the growth of the overall fintech industry.
Now, let’s move on to the digital payment solution’s impact on the finance sector.
Impact of Digital Payment Solutions on the Finance Industry
Digital payment solutions have significantly impacted the finance industry in the following ways:
- Buy Now Pay Later (BNPL)
The Buy Now Pay Later (BNPL) allows users to buy goods and services and pay for them at a later date, either in full or in installments. This concept in fintech is gaining popularity in various industries, but mainly in e-commerce, where customers buy goods and make payments later. As per the reports, it is projected that total BNPL spending will grow by approximately $80.77 billion in the USA.
Impact
BNPL is welcomed by the users because it provides convenience by providing payment flexibility; allowing users to pay all in full or in monthly installments. Due to its growing popularity, many e-commerce companies, retail shops, and other service providers have started providing Buy Now Pay Later as an additional payment option offering convenience to customers.
The US BNPL market is expected to grow to $36.4 billion and is projected to reach $145.7 billion by 2033, expanding at a CAGR of 21% during the forecast period.
- Digital Wallets
Digital wallets are replacing traditional wallets that people used to carry in their pockets. Now, these e-wallets have a place in smartphones in the form of mobile applications and are used to store money, make payments, store IDs, and other documents, pay bills, transfer money to friends and family, and more.
Juniper Research’s latest reports show that digital wallets will be used to transact over $16 trillion in payments by 2028.
Impact
Electronic wallets like Samsung Pay, Venmo, Cash App, Zelle, and Apple Pay are simple to use, providing convenience to users. Moreover, these e-wallets are more secure, thanks to high-security measures such as end-to-end encryption, biometric authentication, face recognition, and PIN protection, giving users convenient and highly secure payment options.
- Contactless Payment Options
Contactless payment options are another convenient and secure e-payment solution in the financial sector. It leverages technologies such as RFID (Radio-frequency identification) and NFC (Near-field communication) to complete touchless payments.
Impact
Earlier, RFID and NFC technologies were found in credit cards, however, as technology evolves, their use has expanded to payment apps, wearable devices, dedicated shopping cards issued by retailers, and more.
Touchless payment options are very popular in countries like the USA, and their users are growing exponentially daily. According to reports, the contactless payment market revenue in the United States was approximately $29 billion in 2016 and it is expected to be $358 billion by 2025.
Source: Statista
- Mobile Remote Deposit Capture (mRDC)
Mobile Remote Deposit Capture has revolutionized check depositing. Earlier, bank customers need to visit banks physically to deposit checks into their accounts.
Impact
With the introduction of mobile remote deposit capture, customers can click the front and back pictures of the check and upload it to deposit. It completely eliminated the need for visiting banks to deposit checks.
Leading banks and financial services providers are now offering the mRDC feature in their banking apps, providing users convenience and speed in depositing checks to their bank accounts.
- Voice-Controlled Payments
Voice-controlled payments are another evolution that is disrupting the finance industry. Instead of entering the amount, choosing an account, and putting in security PINs manually, users can make payments or money transfers just by using their voice.
Impact
Voice-controlled payments provide users with convenience, speed, and security when it comes to making payments or transferring money. It is gaining traction rapidly in the USA and other countries.
The global voice-based payments market was worth $5.92 billion in 2021 and is projected to be $13.62 billion by 2030, expanding at a CAGR of 10.98% during the forecast period.
Considering this growth, many leading banks like Bank of America, Royal Bank of Canada, and Barclays, now offer voice-controlled P2P payment features to their customers. Barclays enables its customers to make voice-based payments using Apple’s virtual assistant, Siri.
- AutoPay
Autopay allows users to make payments automatically on the set time and date. Users do not need to manually go to the app to make payments. They can choose the AutoPay option, set the amount and date, choose the particular account, and all set. The amount will automatically be deducted from the source on the set date and time.
AutoPay is best for making subscription-based payments. Users need to renew their subscription plans frequently, which they often forget. Using the AutoPay option, they can set the amount, date, and source of payment, and the amount will be paid automatically.
Impact
Many banking apps, stock trading applications, crypto apps, OTT platforms, and similar applications have the AutoPay feature to offer speed and convenience to users.
- Payments Through Cryptocurrencies
Last but not least, cryptocurrencies have become a major mode of payment amid the rise of blockchain in the finance sector. Users are now can pay securely for goods and services using top cryptocurrencies, such as Bitcoin, Ethereum, Dogecoin, USD Coin, Binance Coin, and more, just like fiat currencies.
Impact
Latest reports show that 46 million people plan to use cryptocurrencies to make payments, ranging from financial services to groceries, and other services.
Similarly, approximately 2,352 businesses accept Bitcoin in the United States, according to a report from Deloitte. Overall, the growth in crypto payments is going to impact digital payments in the finance industry significantly.
Furthermore, as the blockchain evolves, there will be modes of payment other than cryptocurrencies. Stablecoins, Tokenized Assets, and Non-Fungible Tokens (NFTs) are some of the blockchain-based payment options that will gain attention in the future.
E-payment solutions have transformed the way we used to make payments.
They provide speed, convenience, and security when it comes to making payments digitally.
Moreover, they enhance users’ trust as they provide transparent, reliable, and consistent transaction records that make users feel confident knowing their transactions are secure and traceable.
Also, digital payment solutions like payments apps, money transfer applications, and finance apps, provide users with valuable data insights into their spending habits. This helps them to manage their finances more effectively, track expenses, and make informed financial decisions.
On the other hand, financial institutions use data insights provided by digital payment solutions to analyze customer behavior, identify trends, and tailor services to meet customer needs, leading to strategic growth.
Conclusion
Digital payment solutions have a significant impact on the finance industry. These solutions offer convenience, speed, security, and valuable data insights to both users and banks and financial institutions.
According to experts, it is projected that the digital payments sector will be worth $193.7 billion by 2028, increasing at a CAGR of 11.8%.
In the future, as technology evolves, we will witness more robust digital payment solutions that play a crucial role in shaping the finance industry.
Frequently Asked Questions
The following are some FAQs related to digital payment solutions in the finance industry.
Digital payment solutions are impacting the financial services industry by providing convenient, fast, and secure modes of payment that are used by users to make payments for goods and services.
Advanced technologies like artificial intelligence, blockchain, biometric authentication, end-to-end encryption, face recognition, and more, are used to enhance security in digital payment solutions.
Mobile Remote Deposit Capture (mRDC), contactless payment, Buy Now Pay Later, and voice-controlled payments are some of the emerging innovations in digital payments that are disrupting the finance sector.