The volume of digital transactions worldwide is likely to triple over the next decade on the back of rapid innovations in the payments sector coupled with a significant amount of digitization of the economies.
A recent study says Asia-Pacific will grow the fastest in cashless transaction volume, increasing by 109% until 2025 and then by 76% percent from 2025 to 2030. Growth in Africa (78%, 64%) and Europe (64%, 39%) would also occur rapidly, followed by Latin America (52%, 48%). Interestingly, developed economies such as the US and Canada would grow the least (43%, 35%).
Payments and financial services across the globe have undergone a significant transformation in the last year amidst the COVID19 pandemic, even as physical distancing became the new normal. In a way, the pandemic has accelerated digitization in the payments sector, where new-age Fintech’s were disrupting the way transactions were done. Payments through QR code to pay for groceries in China, tapping a sales terminal with a mobile phone in the US, or making payments through a UPI link in India have already become mainstream.
However, the Covid19 crisis just boosted cashless payment volumes that are likely to triple at three trillion by 2030, according to an analysis by PwC.
The analysis stated that during COVID-19 lockdowns, people were forced to adopt digital modes, thus accelerating the proliferation of mobile-first digital economies. But in a few less developed economies, cash remained essential.
Fast-growing Asian markets such as China and India are driving new business models and innovation. Alipay and WeChat Pay have created a new paradigm around “super-apps” as payment platforms in China, whereas in India, it is the UPI (Unified Payment Interface).
With rising strategic significance, some governments are developing payment infrastructure as part of industrial policy to control money flows and own digital and data platforms, the survey said. The sector has also become increasingly important as a catalyst for reducing transaction costs, fostering growth, and supporting the transition towards digitally enabled and inclusive economies.
Two significant parallel trends that are reshaping involves digital payments. First is the evolution of the front- and back-end parts of the payment system such as instant payments, bill payments and request to pay, plastic cards, and digital wallets. Second is the revolution involving huge structural changes to the payment mix and ecosystem, such as the emergence of so-called buy-now-pay-later offerings, cryptocurrencies, and work underway on central bank digital currencies.
The survey further added that data privacy and cybersecurity were the joint top concern (48%) regarding the impact of regulatory changes over the next five years, followed by digital identity and authentication, cryptocurrencies, and central bank digital currencies (CBDCs).
