Electronic Payments Powering Financial Innovation in 2021

Electronic Payments Powering Financial Innovation; PwC Report Finds

The financial services sector is undergoing a significant transformation, accelerated only by the Covid-19 pandemic.

Given the fundamental role that digitization plays in the financial life of a growing number of the world’s population, electronic payments are at the heart of this transformation.

Payments are rapidly becoming more expensive and the role of industry in promoting inclusion has become a top priority. As digital money gains ground, financial services need to realize that the entire payment infrastructure is being reshaped as new business models emerge.

PwC research shows that cashless payments, such as sending a text message to pay for a bus ticket to Turkey or a QR code to export messages to China, have been evidence of continuing change ahead of the pandemic. global. Digital Economy: A shift will ultimately lead to a global society without money. The global volume of electronic payments is expected to increase by more than 80% between 2020 and 2025, from around 1 tonne of transactions to nearly 1.9 tons and almost triple by 2030.

According to the results, Asia-Pacific will grow fastest, with a 109% increase in cashless transaction volumes from 109 to 2025, followed by Africa (78% from 64%) and Europe (64% from 39%), followed by Latin – America. (52% of 48%) and the United States and Canada will grow less (43% versus 35%).

A world without money, of course. The Covid-19 pandemic has exacerbated a growing shift to digital payments and is likely to accelerate its adoption within three to five years, “said Kurtis Babczenko, a global leader in banking and capital markets and a leader in the United States. PwC: “The acceleration of digital payments will create new opportunities for the entire payments ecosystem, including banks. But it will also reveal weaknesses for those who don’t want to adapt. “

PwC findings highlight the key issues facing the payments industry and underscore the importance of how the industry is responding to these trends.

Financial services firm management teams need to understand each of these trends to properly plan their future:

1. Inclusion and trust

In developing countries, financial inclusion will be driven by mobile devices and access to convenient and affordable payment mechanisms. By 2025, smartphone penetration will reach 80% globally, mainly through research in emerging markets such as Indonesia, Pakistan, and Mexico.

2. Digital currency

Central bank digital currencies (CBD) are expected to have the most worrying impact over the next 20 years.

3. Digital wallets

Looking ahead, 86% of respondents agree with the prediction that traditional payment service providers will partner with fintech and technology providers as the main source of innovation.

4. Battle of the slopes

The senior payment companies interviewed predicted major developments towards a payment infrastructure where card transactions and other transactions in the payment tiers take place on the basis of joint accounts. Important initiatives in Latin America, Southeast Asia, and Europe bear witness to this development.

5. Cross-border payment

42% of respondents said they believe the immediate acceleration of foreign currency and B2B payments will happen over the next five years.

6. Financial crime

Risks to data security, compliance and privacy, and related issues have been key to banks, fintechs, and wealth managers in implementing a fully integrated technology strategy.

Adds Kurtis: “In addition to this step towards a cashless society, we also need to pay attention to a more radical change. Not only are consumers saying goodbye to traditional methods of paying for goods and services, including modest paper checks and analog invoices, but the entire payment infrastructure is currently undergoing renovations. “

The reform envisages two parallel trends: an evolution of the front and back of the payment system (instant payments; advances and payment requests; plastic cards and digital wallets); and a revolution that is driving major structural changes in the payment mix and ecosystem (the emergence of so-called “buy now, pay later” offers; central bank cryptocurrency and digital currencies in progress.

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