Electronic payments are the catalyst for a global cashless society

By on June 2, 2021 0

Covid-19 has stepped up the role of digitization in the financial lives of a growing number of people around the world, sparking a massive transformation of the financial services industry with electronic payments at the epicenter.

Payments are increasingly becoming cashless and the role of industry in promoting inclusion has become a high priority. As digital currency gains increased interest, the financial services industry must recognize that the entire payments infrastructure is being reshaped, with the emergence of new business models.

PwC investigation reveals how, even before the pandemic, cashless payments like texting to pay for a bus ticket in Turkey or using a QR code to shop for groceries in China are the evidence of a constant shift to a digital economy – a shift that could ultimately lead to a global cashless society. Global cashless payment volumes are expected to nearly double from 2020 to 2025, from around 1,000 billion transactions to around 1,900 billion.

According to the results, Asia-Pacific will experience the fastest growth, with an increase in the volume of cashless transactions of 109% from 2020 to 2025, followed by Africa (78% from 64%) and the Europe (64% from 39%), Latin America comes next (52% from 48%, and the United States and Canada will experience the slowest growth (43% compared to 35%).

“A cashless world is in sight. The Covid-19 pandemic has reinforced an already growing transition to digital payments and has likely led to an acceleration in their use by three to five years. The acceleration towards digital payments will create new opportunities for the whole payment. ecosystem, including banks. But it will also expose the weaknesses of those who are not ready to adapt, ”said Kurtis Babczenko, global leader in banking and capital markets, PwC.

“Covid19 is a catalyst for change – we have seen the rapid deployment of payment services across Africa. Current market conditions have created the need for greater financial inclusion, as well as greater innovation and collaboration among financial services players.

“As an emerging market unencumbered by large amounts of legacy technologies, South Africa has the potential to develop a modern payment infrastructure and a cutting-edge payment platform that puts customers at the heart,” said said Chantal Maritz, head of Africa Strategy and Payments Transformation at PwC, said.

PwC’s findings reveal key themes influencing the payments industry and underline the importance of how the industry responds to these trends. In order to properly plan their future FS leaders, they need to have a good understanding of industry trends:

  1. Inclusion and trust
  2. In developing countries, financial inclusion will continue to be driven by mobile devices and access to affordable and convenient payment mechanisms. By 2025, smartphone penetration is likely to reach 80% globally, largely through adoption in emerging markets.

    In Africa, mobile operators and merchants are taking the lead in equipping their customers with cashless means of payment. They also play a key role in financial inclusion and confidence in digital payments. In addition, regulators intervene to promote financial inclusion. It is also reinforced by the need of many African migrant workers to send money home via affordable cross-border payments.

  3. Digital currencies
  4. Central bank digital currencies (CBDCs) are expected to have the greatest disruptive impact over the next 20 years.

    South Africa has embarked on its second CBDC project to explore the use of both a wholesale CBDC and wholesale settlement tokens for interbank use.

  5. Digital wallets
  6. Looking ahead, 86% of our survey respondents agree or strongly agree with the prediction that traditional payment providers will collaborate with fintechs and tech providers as the primary source of innovation. .

    Alternative ‘closed loop’ systems such as e-money and telecommunications-focused mobile money solutions will continue to dominate much of the African continent, particularly sub-Saharan Africa, due to the already established footprint of mobile money agent networks. This trend will continue, with more financial services offerings built on top of it.

  7. Battle of the rails
  8. Key payments professionals interviewed expect significant regional developments towards a payment infrastructure in which cards and other transactions run on payment rails based on common accounts. Key initiatives in Latin America, Southeast Asia and Europe bear witness to this development.

    In Africa, account-to-account transfers are expected to continue to grow given improvements to the national clearing infrastructure focusing on low value and high volume payments, such as the Rapid Payments Program (RPP) in Africa. South Africa. Ghana, Nigeria and Kenya have also introduced instant payment solutions.

  9. Cross-border payments
  10. In our survey, 42% of respondents said they believe there will be an acceleration in cross-border and inter-currency instant payments and B2B payments over the next five years.

  11. Financial crime
  12. In our investigation, security, compliance and data privacy risks and related issues were the primary concern of banks, fintechs, and asset managers in implementing a fully integrated technology strategy.

“Besides this shift to a cashless society, we also need to pay attention to a deeper change. Not only are consumers saying goodbye to traditional payment methods for goods and services, including the humble paper check and analog bills, the entire payment infrastructure is being reshaped.

This overhaul involves two parallel trends: an evolution of the front-end and back-end parts of the payment system (instant payments; bill payments and payment requests; and plastic cards and digital wallets); and a revolution involving huge structural changes in the payment mix and ecosystem (emergence of so-called “buy now, pay later” offers; cryptocurrencies; and work in progress on central bank digital currencies ” , explains Babczenko.