How does the future of Digital Payment look like?

Economics, money, and the way you make payments have undergone numerous changes since the time of the Stone Age. This indicates that humans, as a species, are progressing. The primitive methods indicated humans' primitive way of living. Similarly, today's payment methods backed by cutting-edge technology boast the technological achievements of today.

While businesses were adopting technologies to serve consumers better with convenience, digitization of payments was a big jump towards the goal to achieve all of it. This concept has mitigated many challenges that occur with traditional monetary transactions (i.e. lack of transparency, accountability, accessibility, mobility, security).

Digital payment market saw vast developments in the span of four to five years, and the decade is going to witness even more advancements in the coming future. Given the fact that the global e-wallet transactions had reached US$4,296 billion in 2018 and are estimated to grow US$13,979 billion by 2022, the digital wallet seems like the future of payments.

In such times, it's exciting to see what 2020 has to offer. Let's see how advancements in technologies make digital payments more secure and convenient, and its trends of 2020.

Biometric Authentication

In the year of coronavirus and practising social distancing, Biometric authentication is an emerging trend. It is a verification method that involves biological and structural characteristics of a human. Biometric verification methods include fingerprint scanners, facial recognition, iris recognition, heartbeat analysis, and vein mapping.

With the increasing theft and fraud-related issues, biometric authentication can be a reliable and secure option for all the digital payments of 2020 and for the future as well. Industry data shows that there will be over 18 billion biometric transactions taking place every year by 2021.

Biometric authentication integrates and provides accuracy, efficiency, and security under a single package; hence it is a unique, essential, and highly-secured payment method. As this method requires an individual's unique characteristics, it builds customer loyalty and trust.

Security powered by AI

Security is the most critical element whenever it comes to payment. People always prefer using a payment method that promises high security. That's the reason why payment-related technologies won't go forward without developing top-grade security.

A financial institution receives a lot of customer details and transaction data every day. And to identify all the possible threats within seconds, these institutions are now adopting emerging technologies such as artificial intelligence (AI) and machine learning (ML).

AI's widely used application machine learning is the first step you need to take to secure transactions. Financial institutions, like banks, consistently feed their software with different and new transactions. The software absorbs a set of limited transactions and learns to identify fraud transactions in real-time. As the software receives more and more transactions, it gets better at detecting the fraudulent activities.

Contactless/NFC Payments

Another payment method is contactless payments that are increasing rapidly in 2020. As the name indicates, the contactless payment method allows the users to wave their smartphone over the reader. Such a method of waving is faster, safer, and more convenient than swiping or inserting a card.

Contactless payment is way more secure than the PIN technology as it transfers the encrypted data to the point-of-sale device instantaneously.

Companies such as Google, Apple, and Samsung already have their contactless payment apps Google Pay, Apple Pay, and Samsung Pay, respectively. A customer has to add card details after the installation of the app is done, and then wave their phone over the reader.

Contactless payments are possible with the near-field communication (NFC) technology, and that's why these are also called NFC payments.

The UK, Japan and China have embraced NFC payments. London and China are using this payment mode in public transport, and tube stations. Japan uses this technology to provide information about identity cards.

The United Kingdom finance represents a cluster of financial institutions, and it has projected that almost 36% of total payments will be made through NFC- infused contactless cards by 2027.

Crypocurrency E-wallets

Despite the ups and downs of the market, cryptocurrency wallet users have increased over time. More than 40 million cryptocurrency-based eWallets exist now from the beginning of 2020. Statista reports that the number of cryptocurrency wallet users has gone up from 6.7 million in the first quarter of 2016 to 34.6 million in the first quarter of 2019.

However, buying cryptocurrencies using e-wallets can be the beginning of cryptocurrency investments. You would need a digital wallet to store the digital currency you've purchased.

From cards to codes

Earlier, the bank accounts were identified by a random combination of unique digits present on the card. The Europay, Mastercard, Visa (EMV) technology has slowly picked up and introduced a more automated and secured payment mechanism. EMV technology is known for using codes that varies every time a transaction is made. This use of temporary codes improves security in the bank accounts by leaps and bounds. This instance shows how codes can shape the way bank account systems are handled.

Moreover, cutting-edge payment services that offer more convenient and seamless money transfer methods and stores will overshadow the future of plastic cards.

Conclusion

Undoubtedly, e-wallets are the future. In the coming years, payment methods will be transitioning from physical cash to digital payment methods. Before the transition ends, a lot of new trends will appear and disappear. These future trends will play a crucial role in defining the future payment methods.