E-payments are electronic payments that use digital technologies and platforms to transfer funds between parties. E-payments can be made online or offline, using various methods, such as cards, mobile wallets, contactless devices, QR codes, and biometrics. E-payments are becoming more popular and convenient for both consumers and businesses, as they offer faster, safer, and cheaper ways to pay for goods and services.
The state of e-payments today is influenced by several factors, such as the COVID-19 pandemic, the rise of e-commerce, the innovation of fintechs and technology providers, the adoption of open banking and central bank digital currencies (CBDCs), and the regulation and oversight of payment systems. Some of the main trends and developments in e-payments today are:
The COVID-19 pandemic has accelerated the shift from cash to electronic methods of payment, as people avoid physical contact and seek online alternatives. According to a report by FIS1, digital wallets are now the most popular payment method in the world, accounting for 44.5% of e-commerce transactions in 2020, up from 36.4% in 2019. Contactless payments, such as NFC and QR codes, have also increased in usage and acceptance, as they provide a hygienic and convenient way to pay at the point of sale.
The growth of e-commerce has boosted the demand for e-payments, especially in emerging markets where internet penetration and smartphone adoption are rising. E-commerce sales reached $4.28 trillion in 2020, up 27.6% from 2019, and are expected to grow further in the coming years2. E-payments enable consumers to access a wider range of products and services online, while reducing transaction costs and risks. E-payments also help merchants expand their customer base, increase sales conversion, and improve cash flow.
The innovation of fintechs and technology providers has challenged the traditional players in the payments industry with their agile, customer-centric, and data-driven approaches. These new players offer various e-payment solutions, such as peer-to-peer (P2P) payments, cross-border payments, instant payments, cryptocurrency payments, and payment analytics. Many of these solutions leverage emerging technologies, such as artificial intelligence (AI), blockchain, cloud computing, and 5G networks3, to offer faster, cheaper, smarter, and more inclusive payment services.
The adoption of open banking and CBDCs has created new opportunities and challenges for e-payments. Open banking is a regulatory framework that allows third-party providers to access customers’ financial data and offer payment services with their consent. Open banking enables customers to have more choice, convenience, and control over their financial transactions, while fostering competition and innovation in the payments industry. CBDCs are digital forms of fiat money issued by central banks. CBDCs aim to provide a secure, efficient, and inclusive alternative to cash and traditional payment systems. Several countries have already launched or piloted their own CBDCs, while others are exploring the feasibility and implications of issuing CBDCs.
The regulation and oversight of payment systems have become more important as e-payments grow in scale and complexity. Payment systems are essential for the effective functioning of financial systems worldwide. They provide the channels through which funds are transferred among banks and other institutions to discharge payment obligations arising from economic and financial transactions across the entire economy. An efficient, secure and reliable payment system reduces the cost of exchanging goods and services. It is an essential tool for the effective implementation of monetary policy, and the smooth functioning of money and capital markets. Therefore, regulators and overseers need to ensure that payment systems operate in a safe, sound, fair, efficient, transparent, and inclusive manner.
These are some of the main factors that shape the state of e-payments today. E-payments are undergoing a significant transformation that offers both opportunities and challenges for all stakeholders involved. To succeed in this dynamic environment, e-payment providers need to be adaptable, innovative, customer-focused, and collaborative.