Natalie Monko Lead Project Manager

    Top 5 Digital Payment Trends Driving the Market in 2021 and Beyond

    The world’s digital payment sector is witnessing rapid growth due to the widespread adoption of mobile peer-to-peer transactions, cryptocurrencies, and other innovations. Finaria reports that the global online payment industry was valued at $5.4 trillion in 2020, seeing a 16% surge since 2019. This market is projected to account for $10.5 trillion in the next four years. 

    Recognizing the opportunity to generate profit while addressing end-user needs, companies are integrating cutting-edge payment software solutions. However, it is crucial to keep up with recent tendencies to meet customer expectations and gain a competitive advantage. 

    In this article, software experts at Surf have described the main digital payment trends for 2021 and onward, so that you can get ideas for your project. But first, let’s take a look at how coronavirus changed the payment landscape.

    How did COVID-19 change the digital payment landscape?

    The COVID-19 pandemic has favored increased demand for electronic transactions. Striving to avoid the risk of getting infected, people shifted to online payments, which became the key market driver. As a result, a variety of digital payment trends have gained pace and will continue to evolve after coronavirus ends. 

    Due to the change in shopping patterns, US consumers are expected to spend more than $933 billion on e-commerce in 2021, rising by 17.9% year on year, according to eMarketer. Online sales in the UK jumped by nearly $5.48 billion in 2020, as reported by Grand View Research.

    retail e-commerce sales statistics

    Providers of payment and authentication gateways have also experienced fast growth. For example, Stripe and Plaid financial technology companies almost tripled their valuations in the course of a year, amounting to $95 billion and $13.4 billion, respectively. 

    The key digital payment trends for 2021 and later on

    1. Mobile peer-to-peer payments

    Peer-to-peer (P2P) transactions are among the principal mobile payment trends for 2021 and beyond. Employing this technology, people can transfer money with just a few clicks through their mobile devices and apps delivered by non-bank providers such as PayPal, Venmo, Apple Pay, Google Pay, Facebook Messenger. For this purpose, consumers only need to connect their card or bank account.

    peer-to-peer payment example

    Thanks to speed and simplicity, mobile P2P payments have already become the new normal. Analysts report that 79% of customers say they have already used the service through their financial or non-financial organization. Thus, it is important to enable peer-to-peer payments when building a mobile application for iOS and/or Android.

    2. Artificial intelligence

    Being one of the top digital payment trends, artificial intelligence has many use cases in the sector. With AI-powered solutions, it is possible to safeguard sensitive data. For instance, popular providers of payment gateways like PayPal and Braintree apply machine learning to instantly detect fraudulent activities and prevent cybersecurity risks.
    Facial recognition, a category of biometrics, is another AI application in the industry. Now organizations across different verticals are using face recognition to protect against unauthorized access and other risks to ensure the security of transactions.

    security risks diagram

    Mordor Intelligence predicts that the facial recognition market will surge from $3.72 billion in 2020 to $11.62 billion by 2026, progressing at a compound annual growth rate (CAGR) of virtually 21.71% during the indicated period. 

    Concerning real-life examples, in 2019, SnapPay, a financial technology company, launched a digital payment solution for North American merchants that allows for automating the checkout process. Thanks to facial recognition, SnapPay offers a more engaging and secure online shopping experience.

    AI-based facial recognition app

    Artificial intelligence is also being widely used in customer service. Analyzing consumer behavior, AI can identify payment habits to make personalized recommendations that may include cards with lower fees or increased cashback. By improving user experience, businesses and institutions boost client satisfaction and increase revenues.

    Since AI comes up in the sector with multiple advantages, this technology is definitely among the main e-payment trends for 2021 and years to come.

    3. Open banking

    Representing one of the most interesting digital payment trends, open banking is a practice of providing third-party fintech companies with access to transaction, consumer banking, and other information via application programming interfaces (APIs). 

    With APIs, open banking automates connectivity between financial institutions to enable secure sharing of customer, financial, and other sensitive data. For instance, it is possible to facilitate the process of transferring from one bank’s checking account to another.

    open banking concept

    Open banking offers the following use cases:

    • Aggregating client account data to create a single view of user accounts across numerous banks.
    • Leveraging data analytics to determine spending habits to help users plan out their budgets and manage expenses in a more efficient way.
    • Making tailored product or service recommendations based on user transaction histories
    • Automating loan approval for customers due to simplified access to financial information.

    Open banking assists organizations in improving customer experience, which makes it one of the key online payment trends for the coming years. In its recent report, PWS predicts that 71% of SMEs will adopt open banking by 2022. The research also forecasts that 64% of adults will use this technology by next year. 

    However, today only 18% of consumers have a clear understanding of open banking benefits. PWC states that this number will rise to 64% by 2022, opening up the opportunity to gain a competitive advantage.

    Hence, it is reasonable to employ open banking technology when building a mobile banking application, for example, to streamline payment and lending operations.

    It is worth noting that safeguarding sensitive data is essential to protect against numerous threats and achieve compliance with regulations such as GDPR. Learn how to prevent mobile banking app security issues in the guide prepared by software experts at Surf.

    4. Contactless digital payments

    The use of contactless payments has seen unprecedented growth during coronavirus. Aiming to avoid the risk of becoming infected and take advantage of automated payments, people are increasingly using RFID (radio-frequency identification) and NFC (near-field communication) technologies to make purchases. 

    The Visa Back to Business Study informs that around two-thirds (63%) of customers will turn to a new company that has integrated contactless payment methods. Furthermore, analysts revealed that 46% of respondents consider contactless transactions as one of the key measures for stores to provide safety.

    According to the Mastercard global consumer survey, about 80% of participants say that they employ contactless money transfers. Additionally, Mastercard reports that this type of payment is 10 times faster in comparison with other in-person payment options. 

    Thanks to speed and safety, this digital payment trend is here to stay, as 74% percent of people worldwide plan to continue using contactless transactions after the end of COVID-19.

    5. Cryptocurrency payments

    The global cryptocurrency market is rapidly increasing. Statista reports that the number of Bitcoin daily transactions in January 2021 reached nearly 400,000, rising from 330,000 in December 2020. Since the popularity of cryptocurrencies is rapidly growing, organizations across multiple verticals have started accepting crypto payments.

    PYMNTS conducted a survey of 8,008 cryptocurrency owners and found that 31% of respondents make purchases for a total amount of $100–$1,000 while 19% of users buy goods and services totaling over $1,000. PYMNTS also revealed that 51% of participants are more willing to purchase from merchants that allow for carrying out cryptocurrency payments.

    cryptocurrency payments by generation

    Aiming to satisfy existing demand, many world-famous organizations have already adopted this payment option, for example, Microsoft, Virgin, WeWork, Expedia, Etsy, and Shopify.

    Square, PayPal, and Nuvei now also deliver cryptocurrency transaction services to companies and individuals. This way, crypto payments are one of the most important consumer payment trends for 2021–2022.

    Final words

    With changing customer preferences, the online payment sector is increasing at a rapid pace. The coronavirus outbreak has just accelerated this growth. Now, we are witnessing the fast adoption of innovations such as contactless payments, mobile peer-to-peer transactions, and cryptocurrencies providing lower fees and improved transfer speed.

    Cutting-edge technologies like artificial intelligence are also being widely introduced across a variety of industries, from e-commerce to healthcare and insurance. Thanks to AI, businesses and institutions instantly identify suspicious activities, protect against fraud, and facilitate compliance with regulations. With open banking, fintech organizations can speed up payments and tailor product or service offerings.

    Therefore, by applying the key digital payment trends, it is possible to gain a competitive advantage, satisfy market demand, and earn profit.