Payments Trends to Watch in 2024

Driven by convenience, speed, and cost, consumers have more payments choices than ever before, and companies are becoming more diversified in the options they offer and accept. While there are countless trends in the ever-evolving payments landscape, these are some of the top trends to keep an eye on in 2024.

Empowering Consumers: The Evolution of BNPL

BNPL remains one of the strongest payment options, allowing consumers to break up payments into smaller, more manageable amounts. With already approximately 360 million users worldwide (G2), BNPL continues gaining momentum, and by 2025 it is projected that almost half of Gen Z consumers will use this service.

It’s an ideal alternative to bank credit cards and loans, and appealing among the younger generation who remain cautious about debt, yet highly engaged in e-commerce. Sixteen percent of those in the 18 to 34 age range use BNPL services, compared to consumers over age 55 (G2). The number of consumers expressing interest in this type of platform continues to rapidly expand. BNPL is also a popular option as no hard credit check is required. It’s a game-changing force globally in retail and e-commerce markets.

The Digital Wallet Transformation

The benefits of digital wallets are convenience, speed, security, cost-effectiveness, and financial management. It’s an innovation that transforms how people manage their finances and conduct transactions. Digital wallets enable consumers and businesses to store and manage financial information on digital platforms, making traditional cash and card-based transactions a thing of the past. There are three types of digital wallets: mobile, online, and hardware.

The mobile wallet can be accessed through a smartphone or tablet so users can store financial information (including credit and debit card details) on a mobile device. Online wallets allow users to store financial information via an online platform that can be accessed through a web browser. Users make online transactions for shopping, paying bills, and transferring funds without having to enter card details each time. Hardware wallets are physical devices used to store financial information and private keys are required to access and manage that information.

A study by Juniper Research found that the total spend via digital wallets will exceed $10 trillion in 2025. The future looks promising, and the strongest growth is expected to come via online payments for remote purchases. The proliferation of smartphones and integration with other technologies¬ – such as Internet of Things (IoT) and A.I. will drive growth and acceptance.

The Real-Time Payments Revolution

At the epicenter of a major transformation within the industry is real-time payments, and many believe it to be the future of modern economies. It allows individuals and businesses to instantly move money to and from anywhere in the world. Real-time payments are faster and more secure than traditional bank transfers. This reduces a risk of fraud and provides instant confirmation of successful transactions.

Real-time payments appear to be a benchmark for modern financial transactions and they profoundly impact the way consumers, businesses, and governments make and receive payments. The ways to pay for goods and services shows a steady shift to digital—a shift that ultimately may lead to a cashless global society.

Global cashless payment volumes are projected to increase by more than 80% by 2025 (PwC), and by 2027 real-time payments will account for nearly 28% of all electronic payments globally (ACI Worldwide). The future of real-time payments is poised for continuous growth that will significantly impact the interconnected financial ecosystem.

Biometric Payment Authentications

Security is essential, and Biometric Payment Authentication (BPA) technology is tailored for end user security. It measures statistical analysis of a person’s unique characteristics, by simply scanning a person’s finger instead of using a card swipe. The user still has to type in their PIN as normal and the system uses a scanning device, with software to convert the scanned data into a digital format, and a database to store data for comparisons.

Fingerprint payment is the most common method of BPA, however there are two types of biometric authorizations: physiological identifiers and behavioral identifiers. The first includes facial, iris, voice, fingerprint recognition, and retina scanning. The latter considers the unique way in which an individual acts – like typing patterns or how they interact with a website or app.

It is anticipated that the global BPA market will grow 36 times in size by 2027 (TechTarget). Benefits for the end user include security, convenience, faster payment experiences, no cash carry, checks, or credit cards, and a lower cost per transaction for the merchant compared to credit and debit cards.

Identity-Based Payments: The Phone Number as Your Financial Fingerprint

Moving beyond biometrics, in 2024 we will see phone numbers become a linchpin in payment authentication. Identity-based payments, where phone numbers become central to the authentication process extends beyond mere transactional security, venturing into a comprehensive verification system that taps into an individual's credit, employment, and personal ID histories.

Phone numbers are nearly as unique to individuals as their fingerprints, yet far more accessible. They are becoming instrumental in verifying identities in a multi-factor authentication process, where a person's number is tied to critical facets of their financial persona.

Here's how phone number-based verification is revolutionizing payments:

1. Credit Verification: By linking a phone number to credit databases, lenders can quickly assess a borrower's creditworthiness without traditional credit checks, streamlining loan approvals and e-commerce purchases.
2. Employment History: Employers can utilize phone numbers to swiftly verify employment history, enabling a faster and more secure validation process for transactions requiring proof of employment.
3. Personal ID History: A phone number can act as a key to unlock a person's identity history, aiding in fraud prevention by cross-referencing the number with public records and ID databases.
4. Propensity to Pay: Analyzing payment and transaction histories associated with a phone number helps businesses gauge a customer's propensity to pay, allowing for more personalized credit and payment terms.
5. This holistic approach not only tightens security but also enhances user convenience. It's a dual boon: consumers enjoy a frictionless payment experience while businesses benefit from a robust risk assessment tool. As identity-based payments gain traction, they promise to deliver a more secure, efficient, and personalized payment ecosystem.

Harnessing Data: The Power of Payment Analytics

Payment analytics reveal past sales performances and provide insights into future business performance, helping businesses better understand why their current financial performance is the way it is and predict how it will be in the future. Each transaction represents customer satisfaction, loyalty, new product offerings, and the effectiveness of the checkout process. It is also a barometer to gauge a deeper level of insight that can be used to make smarter business decisions.

Payment analytics review and analyze transaction data across channels, and around the world. It is critical to help business owners operate more efficiently and effectively. By analyzing payment transactions, customers will clearly show through their purchase behavior what they like and don't like about a business.

One example: Calculating CLV (customer lifetime value) enables business owners to better understand how much each customer is projected to spend over the length of their relationship with the business. This enables a business owner to project future revenue based on his/her current customer base and segment customers to better understand why some spend more.

Chargebacks are especially disruptive because not only does a business lose the money it needs to refund, it may also lose the product that was sold, shipping costs, and the costs incurred selling it. Payment analytics help to understand which transactions tend to lead to chargebacks and actions to take like improving security standards to reduce fraud.

There are numerous elements that impact every vertical of the global economy when it comes to payments, but these are the five trends to watch closely as they’re anticipated to gain immense traction. Businesses and customers who embrace them will be at the forefront of the future of payments, leading the way into a whole new world.