The report found that digital wallets are expected to overtake cash as card is the most popular in-store payment method and by 2024, cash is set to account for less than 10% of in store payments in the UK and 13% of global payments. In 2020, cash payments fell by 50% in the UK, mainly due to the pandemic.
It also found that globally, contactless in-store payments through a mobile wallet exceeded in-store cash and card payments for the first time in 2020 and by 2024, digital wallets will account for one in three in-store transactions.
By 2022, the report states that non-cash transaction volume is set to reach 1.8 trillion worldwide, up from 780bn in 2020.
Capgemini‘s 2021 survey found that nearly 45% of consumers used a new payment such as a mobile wallet to make a payment which was up from 23% in the 2020 poll.
The report states that e-commerce and m-commerce was the main growth engine behind the rise in digital payments with the Covid-19 pandemic also noted as a catalyst.
The report also found that retail customers are increasingly open to sharing their financial data with non-banks to help custom-tailor payment methods. According to Capgemini’s survey, 86% of customers are willing to share their financial data and 70% are happy if non-banks make payments on their behalf with permission.
Another trend highlighted was the rise in next-gen payments which are poised to ‘drive the new era of global non-cash transactions’. Next-Gen payment methods include buy now pay later schemes, invisible biometric, and cryptocurrency.
The report said: ‘The Covid-19 pandemic necessitated the payments industry undergo a facelift, sparked by novel approaches from new-age players, fostered by industry consolidation, and customers’ demand for an end-to-end experience.
‘As customers embrace next-gen payment methods, non-cash transaction volumes rally as the payments instrument mix drifts to digital. What’s more, authentication was and will continue to be critical in virtual scenarios, which makes digital ID infrastructure a top-of-mind topic.
‘The clock is ticking for banks and traditional payments firms because the competitive advantage is not guaranteed forever. As industry players seek economies of scale, consolidations loom, and non-banks explore new territories to threaten incumbents’ market share.
‘While all these 2022 trends are at play, central bank digital currency (CBDC) is emerging globally and might open a new chapter in the current payments landscape.’
The rising trend of private digital currency or cryptocurrency such as bitcoin will continue to grow with 86% of the world’s banks currently exploring digital currency in various use cases.
Globally, cryptocurrency transactions rose by 32% in the second quarter (Q2) 2021 with Asia being the frontrunner, recording a 44% increase. Cryptocurrency adoption is rising as almost half, 45%, of consumers, stated that they were willing to use cryptocurrency payments in the next one to two years.
Marcello Vittorio Ronco, head of digital platforms and ecosystems, Unicredit said: ‘Central bank digital currencies could bring further substantial innovation to payment systems. However, what is important, from our perspective, is the model that will be defined and implemented to distribute and manage these digital currencies.’
The report stated that with the rise in digital payment methods, cybersecurity has been the top priority for financial institutions and payment service providers. The report stated that account takeover fraud rose from 34% in 2019 to 54% in 2020.
A 2021 Mastercard survey found that one out of four consumers experienced some kind of financial fraud in 2020 which was a 49% rise in cybercrime from the year before.
In response to the rise in digital payments, financial companies are expected to implement a combination of digital identity automation, and analytics to derive insight that reduces cyber risks.
They are also expected to develop ‘beefed up’ cyber risk assessments to help mitigate financial losses from cyberattacks such as data theft.
