In some parts of the world it’s difficult to imagine life without digital payments. Credit cards, online payments and even using mobile devices to make payments, are the rule rather than the exception. Digital payments have truly entered the mainstream, while traditional payment methods like cash and cheques are becoming increasingly niche.
Such has been the rise of digital payments that the global digital payments market is expected to reach $7.6 trillion by 2024 after recording a CAGR of 13.7 per cent between 2019 and 2024. According to Industry Research, which made the forecast, the market is expected to flourish due to “the robust proliferation of the internet” and the fact the global economy is becoming increasingly digitalised.
To understand how central digital payments have become to the financial services and technology sectors, consider the three following areas of development:
Major moves by traditional players
Citigroup – a global banking group with more than 200 million customer accounts and which operates in over 160 countries and jurisdictions – announced in March it is developing a consumer-payments platform. This will mark Citi’s entry into the digital payments industry.
The service will let merchants use consumer payment options to collect money, including from credit cards and e-wallets.
Naveed Sultan, global head of Citi’s treasury and trade solutions, said the new platform is about going beyond the B2B payment space: “By developing capabilities to enable institutions to collect from consumers in a globally consistent and seamless fashion.”
Citi is working with payment processor Mastercard to facilitate the service as it is already integrated with digital payment providers and e-wallets around the globe. The bank added it is collaborating with other digital payment companies to incorporate up to 140 alternative payment methods into its service.
More recently, a senior Citi executive said the bank is aiming for its new digital consumer payments business to be live in 20 markets across all regions, including Asia, by the first quarter of 2020, expanding up to 40 markets over the next three years.
And Citi isn’t the only traditional financial services company aiming to make an impact in digital payments. Other developments include Visa investing in Conductor, a digital payments processing platform, with the aim of accelerating payment innovation and to driving adoption of digital payments in Brazil.
Digital payments industry consolidation
Billion-dollar mergers and acquisitions are always a sign of an industry that has momentum and is entering the mainstream.
In digital payments, such deals include US fintech player FIS agreeing to buy payment processor Worldpay for close to $35 billion in March. This is the biggest acquisition in the digital payments industry to date and is currently awaiting approval by EU antitrust regulators.
In May, another US fintech company Global Payments announced it was merging with rival Total System Services for $21.5 billion.
The move is aimed at helping Global Payments acquire scale in a consolidating industry and create a software stack with the development capabilities to better compete in omnichannel, e-commerce and digital payments.
Governments exploring digital payment potential
There are numerous government initiatives aimed at boosting digital payment adoption, but there are also examples of efforts to ensure digital payments can maximise their economic potential.
In India, a committee appointed by the Reserve Bank of India (RBI), and headed by Ministry of Electronics and Information Technology chairman Nandan Nilekani, recently submitted suggestions on promoting digital payments to the bank’s governor, Shaktikanta Das.
The RBI set up the panel to develop policy to encourage the development digital payments and use the technology to improve financial inclusion. The RBI is currently examining the recommendations for inclusion in its Payment Systems Vision 2021.
Elsewhere, representatives from Singapore, Chile and New Zealand have conducted talks aimed at creating an agreement to tackle issues in the digital economy, such as artificial intelligence governance, digital payments, invoicing and identities.
The Digital Economy Partnership Agreement (Depa) is being spearheaded by Singapore’s Trade and Industry and Communications and Information ministries. According to a statement, it is an opportunity “to set forward-looking standards on digital trade, and establish new international approaches to support the digital economy and trade in the digital era”.