The 5 trends that will dominate tomorrow's payment industry

Due to the rapidly changing economic, political and social conditions, regulations and the technological ecosystem, the payments sector is undergoing a real revolution. What does the future of payments look like? 

In this article, we will discuss some of the main pre-existing payment trends but to be expected as tomorrow's dominant payment methods.

China is leading the way in digital wallets and mobile payment:

During the Covid-19 pandemic, we can conclude a lot about the future of payments. The next decade will see mobile payment increase drastically, leading to a decrease in bank card use. Over the next five years, mobile payment is expected to account for 2/5 of the US in-store purchases, quadrupling the current level. 

Whether it's retailers' apps or e-wallets issued by financial institutions, mobile payment provides convenience and security to consumers and businesses. By 2020, more than one billion users have made mobile payment transactions.

Besides, the rapidly evolving situation in China can project us into the future of the payment industry. The country is creating a leading mobile payment infrastructure. In China, the value of online payments is three-quarters of GDP (71%), almost double the 2012 proportion. 

Today, almost half of the in-store purchases in China are made via mobile phones, well above the levels of other developed markets (25% in Germany and 24% in the United States). 

Mobile payment already accounts for 22% of global point-of-sale spending in 2019 and is expected to account for almost one-third (30%) of it within five years. The growing share of mobile payments adoption will largely come from the gradual decline in the use of physical debit and credit cards as a result of the pandemic.

Social networks, a dominant payment channel in the future:

The war on social commerce has already begun a few years ago but has been accelerated by the Covid-19. More time spent confined at home means for many people much more time spent on social media. Content creators don't lack the creativity to hook their audience. Entertaining reliable content in the eyes of subscribers, and calls to action placed in the right spot allowing users to spend in just a few clicks.

In Asia, social networks have served as payment networks for consumers for some time. In 2019, 92% of residents of china's major cities reported using WeChat Pay or Alipay as their main payment method. In 2019, consumers spent more than $95 billion on mini-programs on WeChat alone. The battle over the mobile payment method that will conquer the market is heating up.

In 2020, nearly 77% of social media users worldwide bought at least once through this channel. 9 out of 10 consumers plan to buy from a brand they follow on social media and 87% of users say they follow influencers to inspire their purchases. Social networks are becoming an indispensable channel along the customer journey and could be a dominant channel in the years to come. Consumers are increasingly comfortable with the idea of buying through social networks like Instagram, Facebook or WeChat. And with agility, social platforms adapt to the trend by building new integrated features and transforming them into business platforms: from calls to action to visual product searches to transactional Chatbots. 

Brands, convinced that social networks will be a very important payment channel in the future, are also joining the social trade game: 

• Nike uses Instagram's payment feature to sell directly into the app. 

• Gucci gives access to "try your sneakers" in 3D on Snapchat. 

• Lévis turns content creators' videos into a "buy now" call to action on TikTok.

This is a global transition to social commerce that brands must follow.

Z Generation illustrates tomorrow's payment behaviors:

As we already know, the retail and banking sectors strive to provide a multitude of payment methods, online and in physical stores, customized to customer preferences.

Guillaume Leman, Director of partnerships at Cofidis, said that the behaviors and expectations of the Z Generation perfectly illustrate the payment behaviors of tomorrow. First of all, we are talking about a fluid experience, dematerialized and mobile payment methods. 

Above all, Z Generation does not want to be held back in its act of purchase. It promotes simple, fast and secure solutions. For example, almost 2 out of 3 young people between the ages of 18 and 24 (64%) are interested in fingerprint authentication and almost 4 out of 10 young people aged 18 to 24 (39%) are interested in the "one-click" payment. Z Generation plays an important role in shaping the future of payments. Born and raised in a mobile world, this technology-savvy generation accounts for nearly 26% of the world's population. 

Generation Z is looking for more customization, better quality, and greater performance from companies. Brands targeting this Z Generation, which represents tomorrow's consumers, will have to meet their digital, flexible and mobile-oriented payment preferences. The ever-present smartphone is becoming the new portfolio of choice for this generation, so many consumers choose to put their favorite cards in their phone instead of taking the physical card everywhere with them. This is causing major changes in the overall adoption of mobile payment.

Towards a digital currency era:

Many countries of the world have already become cashless. Well-known financial organizations and governments are already considering creating their cryptocurrencies and other digital currencies. Recently, VISA filed a patent to create its digital currency with Ethereum. Other global companies working on digital currencies include Facebook, JPMorgan Chase, Walmart, Amazon, Tencent and Google. Central banks are also calling for the development of their own digital currencies. The Bank of Japan has plans for a digital yen, while China has already launched its Digital Yuan.

Payment methods built into cars:

Consumers, who have become increasingly demanding, are looking for the most direct way to make payments, and this trend stimulates invention. Smart cars now have built-in payment systems that allow drivers to pay for gas, parking and drives without touching anything. Many changes are occurring in the world of payments. Most of these changes, such as digital currencies, are already gaining ground. 

While large groups have little to fear, medium-sized businesses need to evolve rapidly to retain and grow their customer base. Integrating the latest technologies into the process and finding future payment technologies are essential to remaining competitive.