Digital payments are transforming the eCommerce landscape by opening new opportunities and posing fresh challenges for vendors. In the competitive world of online shopping, your success as a vendor hinges on more than just product quality; the ease and security of the payment process often play a pivotal role.
In this blog post, we explore the top digital payment trends for 2023 and beyond, focusing specifically on the eCommerce sector. We’ll examine the key factors that drive the growth of digital payments, uncover the emerging technologies that shape this landscape, and provide insights into the opportunities to leverage and challenges to navigate. These insights are essential for vendors aiming to thrive in the constantly evolving environment of digital commerce.
The evolution of digital payments
Enabled by the rapid advancement of technology and the rise of mobile devices, digital payments have become more accessible, convenient, and secure than ever before. With global cashless payment volumes expected to increase by over 80% from 2020 to 2025, the digital payments industry is experiencing significant growth that’s fueled by emerging payment trends and new payment methods.
From traditional banks to fintech startups, financial institutions are increasingly embracing digital payments to stay competitive and cater to the evolving preferences of consumers. This shift is evident in the growth of new digital payment solutions providers who experienced a staggering 68% growth in revenues between 2019 and 2021.
From traditional to digital transactions
The shift from traditional to digital transactions has been driven by the desire for convenience, speed, and security in financial transactions. One notable example is the rise of buy now, pay later (BNPL) companies, like Shopify’s Shop Pay Installments, Affirm, and PayPal, which are part of the growing payment services industry. By offering more flexibility and affordability, BNPL payments are projected to account for approximately 24% of eCommerce transactions by 2026.
According to Lankitha Wimalarathna, CEO of Hiveage, “In the realm of business-to-business (B2B) transactions, digital payment platforms are also making a significant impact. For instance, Two’s B2B payment platform, launched in collaboration with Santander Corporate & Investment Banking (CIB) and Allianz Trade, enables business buyers to complete a purchase within approximately 30 seconds, with Two taking on the credit and fraud risk. As a result, businesses are able to streamline their operations, improve cash flow, and foster stronger customer relationships.”
The role of mobile devices and apps
Mobile devices and apps have played a crucial role in the widespread adoption of digital payments. With the rise of digital wallets, like Google Pay, Apple Pay, and Shop Pay, consumers can now make secure and instant online payments using their mobile devices with just a few taps on their screens, including the use of debit cards.
Mobile wallets provide increased security, availability, and ease of use as well as other advantages, such as loyalty and reward programs. However, it’s essential to consider potential risks when using mobile wallets, such as the fact that not all markets worldwide may accept payments from mobile wallets. Additionally, in the event of a lost or dead device, an individual’s ability to pay may be limited or eliminated if their payment account is reliant on a mobile wallet.
Key trends shaping the digital payments landscape
As digital payments in eCommerce continue to evolve, five primary trends are shaping its future: digital wallets, alternative payment methods, open banking, machine learning, and financial inclusion.
1. Growth of digital wallets and mobile payments
Driven by consumer demand for seamless and secure transactions, the growth of digital wallets and mobile payments is expected to continue its upward trajectory in the coming years. GlobalData forecasts a compound annual growth rate of 19.9% for mobile wallet payments with digital wallet usage predicted to reach 60% of the world’s population by 2026.
Businesses must be prepared to offer a variety of wallet solutions tailored to their customers and target audience. This includes partnering with prominent digital wallet providers, like Google Pay and Apple Pay, and ensuring their payment infrastructure can accommodate the growing number of mobile and digital wallet users.
2. Emergence of alternative payment methods
Alternative payment methods, such as cryptocurrencies and peer-to-peer payments, are emerging as viable options for consumers and businesses alike because they offer more flexibility and choice in transactions. Cryptocurrencies, like Bitcoin and Ethereum, are gaining traction as digital assets that can be used for blockchain-based payments. However, their adoption as mainstream payment options remains limited due to market volatility and regulatory uncertainty.
Central bank digital currencies (CBDCs) are being examined as a potential way to improve certain circumstances. These include increasing financial inclusion, curtailing money laundering, and regulating cryptocurrencies.
3. Open banking and API integration
Open banking and API integration are transforming the financial services industry by enabling greater collaboration and innovation among banks, fintech companies, and other stakeholders. Open banking allows for enhanced customer data portability to give consumers more control over their financial lives and foster competition among financial institutions.
API integration is critical in driving innovation within the payment ecosystem. By leveraging API integration, businesses can seamlessly integrate digital payment capabilities within and across their platforms to provide customers with a wide range of payment options and services.
4. Machine learning and AI in fraud prevention
Fraud prevention is a critical aspect of the digital payments landscape, and machine learning (ML) and AI are playing an increasingly important role in detecting and preventing payment fraud in real time. These advanced technologies analyze vast amounts of data to identify patterns and anomalies that may indicate fraudulent activity to help businesses safeguard their transactions and protect their customers.
By leveraging ML and AI, businesses can stay one step ahead of potential threats and ensure the security and integrity of their digital payment systems. This also fosters trust and confidence with customers.
5. Financial inclusion through digital payments
Digital payments play a crucial role in promoting financial inclusion by providing access to financial services for unbanked and underbanked populations. By offering a range of digital payment methods, businesses can help bridge the gap between traditional banking services and the needs of these underserved communities. The impact of digital payments on financial inclusion is particularly evident in emerging markets where access to traditional banking services is often limited.
The future of digital payments in eCommerce: opportunities and challenges
Digital payments are developing very rapidly in eCommerce. Looking to the future, we can see many obstacles. When companies develop their plans for the future, this should be taken into account.
- When talking about the digitalization of payments, globalization and accessibility are promised. At the moment, markets around the world have become accessible, bridging the gap with underserved regions. This allows businesses to expand and gives consumers access to goods and services.
- It has also influenced personalization and improved customer access. Most companies are using AI and research data to tailor customer purchases to suit them. This approach improves customer satisfaction and increases sales.
- Today, security is the most important aspect of digital transformation. Many advanced machine-based technologies have emerged that improve fraud detection immediately. Correspondingly, users gain confidence in doing business.
- Payments on the internet became an innovation when new technologies started to be used. A lot of new possibilities were opened up and used when making purchases, such as blockchain, body verification, and much more.
- Digital payments have become very widely used. Financial inclusion and constant growth are the words that can be used to describe digital payments. This is a crucial stage in business expansion in many areas.
However, different online payment methods have disadvantages. Each country has its own payment requirements, and they require certain actions from service users, such as, for example, to maintain confidentiality when offering your payment experience.
Integration and collaboration present many obstacles. Financially exhausting and complex technology is seamlessly integrated with a variety of online payment methods. As well, every day, the market is heavily influenced by cryptocurrencies. The high volatility of the cryptocurrency market has influenced its spread in payment methods.
There are also large social and economic inequalities in the world with digital solutions. To address this issue, new approaches and developments are being used to make digital payment systems suitable for everyone.
Navigating the future together
The future of digital payments is exciting, but it requires a balanced approach that innovates responsibly. Collaborative efforts between traditional banks, fintech, technology providers, and regulators can lead to robust solutions that address both opportunities and challenges.
The vision for inclusive growth must be at the heart of the digital payment revolution to ensure that advances are not only profitable and convenient but ethical and sustainable as well. As businesses, consumers, and innovators, we must work in unison to build a future where digital payments enhance global commerce without compromising on security, privacy, and equality.
Maya Kirianova is a freelance writer with a passion for crafting engaging content that spans various niches that range from technology to business. With a strong foundation in these industries, she delivers insightful and well-researched content that helps businesses and individuals navigate the complexities of the financial world.
Published October 25, 2023