During COVID-19 lockdowns, many people adopted digital behaviors,
accelerating the proliferation of mobile-first digital economies and
rendering cash even less relevant to daily life than it already was.
Underneath the shift to cashless lies a larger, more profound change.
Not only are traditional ways of paying for goods and services
- including the humble paper check and analogue invoices
- set for radical transformation,
but the entire infrastructure of payments is being reshaped,
with new business models emerging.
That reshaping involves two parallel trends: an evolution of the front-
and back -end parts of the payment system (instant payments; bill payments and
request to pay; and plastic cards and digital wallets); and a revolution
involving huge structural changes to the payment mix and ecosystem
(emergence of so-called “buy now, pay later” offerings; cryptocurrencies; and
work underway on central bank digital currencies).
How the payments matrix develops will be determined by the response of banks,
technology companies, regulators, governments and consumers to arguably
the most profound change in how money moves - even what defines money in our society
- for decades to come.
Six Payments Macro Trends
1.Inclusion and trust
- Two-pronged strategies and opportunity will drive consumer and
merchant inclusion.
- Focus on mobile money, wallets, and domestic and QR code
solutions will ensure reach and low cost.
- Central banks and trust in new providers, payment methods
and the financial system.
2.Digital currencies
- Sixty percent of central banks are exploring digital currencies; 14%
are conducting pilot tests.
- Decentralized finance and private cryptocurrencies are facing central bank
concerns about undermining the conduct of monetary policy.
- Fiat-cryptocurrency conversation and storage are emerging opportunities.
3.Digital wallets
- Use of mobile payments will continue its inexorable rise.
(CAGR between 2019 and 2024 is estimated at 23%)
- QR code, open banking and super -app proliferation
will drive digital wallet adoption.
- Convenience will drive users and usage to digital wallets
as a first point of contact and away from traditional card and banking interfaces.
- B2B and digitized supply chains are the next frontiers for wallets.
4.Battle of the rials
- Payment initiation is changing from cards and accounts to
digital wallets that are supported by open banking.
- Regulators will force the industry to strengthen domestic
infrastructure for payments.
- Consumers in emerging markets are leapfrogging the ‘card age’ and
migrating directly to mobile wallets and account-based payments.
- Both traditional card networks and domestic wallet solutions
will be challenged to connect ‘open loop’ payments with cross-border payments
to retain relevance.
5.Cross-border payments
- Instant, low-cost payments are driving the reinvention of cross-border payments.
- Global payments standardization will enable cross-border
connectivity of domestic instant solutions.
- Reginal solutions (especially in Asia) and global nonbank solutions
based on cryptocurrency and digital wallets will emerge.
6.Financial crime
- As consumers and businesses adopt open banking and instant
and alternative payment, organized ‘fraud-as-a-service’ is growing.
- Security, compliance and data-privacy risks were the top concern for bank and fintech.
- As financial crime become more sophisticated,
providers will need to protect their full ecosystem.
Source: PwC analysis
