The digital payment market is cashing on its potential and is expected to generate a valuation of US$ 243,426.71 million by 2028-end. With the declining burden of cash usage, financial digitalization is gaining worldwide popularity. Shifting consumer preferences in modern-day transactions from cash-based payments to electronic-based payment methods is becoming the norm in daily life. The increasing internet penetration has brought about a significant change in global economic functions.
Figure 01: Digital Payment Market Forecast by The Insight Partners
The rising prevalence of mobile phones, expansion of mobile commerce, and changing consumer behavior act as catalysts to promote the adoption of the digital payment market. The sub-products of digitalization such as digital wallets, payment apps, and account-to-account transfers are fuelling reimagined consumer experiences. The market vendors are offering effortless, embedded payment solutions to keep up with the striving tech-savvy generation.
The move towards open data will make the payment experience smooth and secure. To provide a seamless regulatory environment for next-generation payments, various economies are introducing standardized data. The ease of interoperability and partnerships beyond borders will make the payment experience effortless. From the advent of subscription-based pricing to the adoption of digital wallets, the need to enter cumbersome card details has started to feel slow and outdated. In the fast-paced lifestyles, the purchasing journeys need to have fewer procedures and be truly one-click.
The e-commerce market is advancing hand-in-hand with the digital payment market to offer a high-quality, flexible payment service. Many e-commerce websites are sealing the deal and forming partnerships with digital payment providers to evolve. For example, the e-commerce digital project by the Indian government, ONDC, in December 2023 has entered into a definitive agreement with Meta. This partnership is aimed to mark the transition of WhatsApp into an ecosystem of business and technical solutions providers for small businesses.
Consumer Acceptance Towards Digital Payments
Intellectual and pragmatic borders were broken by the advancements in information technology. A high level of e-commerce is a standard goal for economies globally. The ease of transfer of money offered by digital payment methods breaks the barriers of location. The rise of the financial technology sector, non-banking financial institutions facilitating digital payment, and the push by governments worldwide in ways of give incentives or tax breaks create a positive consumer atmosphere for the growth of the digital payment market.
Digital wallets and interbank transfers at merchant places have been observed to be the most acceptable method of transactions. One major concern in the market is the security and fear of unauthorized use. With various security provisions built into digital wallets, growth in technology has opened many modes of safe and secure transactions. The comfort and convenience offered by e-commerce solutions to shop online without physically going anywhere drives the adoption of mobile payment apps. Consumers are positively inclined to the flexible payment brands. Cashback and discounts are being offered by most of the leading players to attract consumers and broaden their consumer reach.
Unlocking the Security Potential of the Digital Payment Market
Security is one of the topmost priorities of the customer agenda, thus, the digital payment environment needs to be dynamic, robust, and secure. The phenomenal growth in consumer acceptance of electronic payment solutions has pushed traditional financial organizations to utilize innovative opportunities in the digital payment ecosystem. However, the mounting charts of cybercrime and payment frauds creates even greater challenges for market players. The increasingly rising number of cybercrimes is a global menace. As businesses adopt digital transformation, they should have a robust and reliable payment infrastructure.
The prominent players are overcoming the challenges by the introduction of newer and quirkier payment methods. Technological advancements and regulatory support are making space for a lot of innovation in the market. With a strong sense of regulatory focus and multiple governmental headways into it, market players have tides flowing in their favor to customize their consumer demands.
Real-time payments are provided with real-time cyber security. Market players are moving security beyond the server room and into the boardroom. With the exponential rise in regulatory provisions, and enhanced fraud detection abilities the payment solutions of today are robust. Many measures to implement controls for risk management associated with service providers are being taken. Compromise assessments, periodic threat modeling, and tests for cyber-attack detection are incorporated into the digital payment gateways.
Digital Payment Innovation Marketing in the Retail Sector
In the recent past, innovations in financial technology, especially in the digital payment market, have changed the face of the retail industry. The successful adoption of digital payment technologies in the retail sector is facilitating the ease of the payment process. Cashless payment solutions ensure quick checkouts, minimized wait times, and an improved customer experience. Tech-savvy consumers who prefer convenience are attracted to the emergence of digital payment platforms such as mobile wallets and contactless payments.
Many retailers are investing in innovative digital technologies that integrate artificial intelligence in retail market. Digital payment platforms improve overall operational efficiency and reduce handling costs. The integration of digital transformation and retail streamlines the workflow in organizations. The Insight Partners expects the emergence of virtual and augmented reality into the retail payment sector. This will offer customers a more personalized and immersive shopping experience.
Interplay Between Finance and Technology- Emerging Technologies in the Digital Payment Market
The ubiquitous digital environment coupled with the rising internet usage has triggered the emergence of innovative technologies in the digital payment market. The advantages of electronic-based payments go beyond just ease of payment. The advent of digital payment technologies expands the geographical base of consumers, reduces operational costs, and most importantly provides a window of growth to many informal shadow economies to compete in the ever-changing global dynamics.
Blockchain – The integration of blockchain’s cryptographic technology in today’s payment solutions by market companies adds an extra layer of encryption and security to safeguard sensitive data.
QR Code Payments – QR code payments are contactless and gaining traction. They are safe, simple, and secure modes of payment transfer in comparison to traditional payment methods.
Machine Learning – Machine learning algorithms in the digital payment market can offer actionable insights to perceive consumer behavior and purchase patterns.
Artificial Intelligence – AI is pivotal in each turning leaf today. The digital payment market is not distant from this groundbreaking technology. Combining AI with digital payment solutions is particularly significant in fraud detection. It is significant in detecting criminal activities.
Biometrics – Biometrics, when incorporated with AI captures unique user information and creates a user authentication profile, thus, reducing the risk of fraud.
Digital Payment Market Stability
In Emerging Economies –
The financial ecosystems in emerging economies are committed to expanding their digital payment gateways. Government support is the primary factor significantly pushing innovation in the region. Digital payment transactions have prominently gained traction owing to the government and regulatory support in the region. For example, the number of digital payment transactions in India increased from 2,071 crore in 2017-18 to 8,840 crore transactions in 2021-22. (Source – RBI)
Asia Pacific exhibits a notable propensity for innovation and is anticipated to lead the regional market competition in the coming years. Rising disposable income, increasing internet penetration, booming e-commerce, and government support and incentives are expected to drive the digital payment market in the region. The region is considered to be a hotspot for market players to expand.
In Developed Economies-
The encouragement for a cashless circular economy in the developed economies is leading the digital payment market growth. The presence of several notable players in the region makes it prone to development and research. The strong market ties and a robust regulatory framework accelerate the adoption of e-payment solutions.
North America’s advanced IT infrastructure and a growing tech-savvy population favor the region’s dominance in the global market. The interplay between the financial sector and e-commerce in the region ensures a thriving future for the players operating in the region. In the second half of 2023, for consumers in the United States to experience seamless transactions between PayPal and Venmo, the two payment gateways, Visa collaborated with PayPal and Venmo.
Cashing on a Cashless Digital Future
The global digital payment market is foreseen to garner a valuation of US$ 243,426.71 million by 2028-end in comparison to a value of US$ 89,045.67 million in 2021. The market will experience a significant contribution owing to the rise in mobile commerce. Many innovative technologies are likely to be launched that will make digital payment solutions more affordable for small and medium-sized enterprises. Contactless payments are on the rise and the “one-click” rule is not far away. The digital payment ecosystem will power the economy, commerce, and trade globally. The market will see a heightened sense of competitiveness with consumers preferring value-added services. Wearable technology is on the rise and market players are focused on research to integrate the wearable technology market with digital payment solutions. In conclusion, the digital payment market is in the midst of an ongoing revolutionary change and is anticipated to rapidly progress globally as the accepted norm in payments and transactions. The advancements in the market will enable organizations to conduct their businesses beyond borders.
