Alternative payments: Types, Advantages, Usage, Security, Regulation, Impact, and Future trends
Alternative payments refer to payment methods that are used as an alternative to traditional Payment Systems like cash, checks, or credit cards. These types of payments gain popularity due to their numerous advantages such as simplicity, speed, and convenience. They often involve digital or mobile transactions, including digital wallets, mobile payments, cryptocurrency, and peer-to-peer (P2P) payments. According to a study by Juniper Research, the total value of mobile money transactions is expected to exceed $12 trillion by 2024.
One of the main advantages of Alternative payments is their ease of use. They often require just a smartphone or internet connection, making them accessible to a broad range of consumers. Additionally, these payment methods can offer faster transaction times compared to traditional banking. According to a study by McKinsey, transactions made through digital wallets can be up to 80% faster than transactions made through traditional banks.
However, the usage of Alternative payments is not without its challenges. Security features are a major concern, as these payment methods can be vulnerable to cyber threats. Many alternative payment providers have implemented advanced security measures like encryption and tokenization to protect user information. Despite this, regulation of these payment methods can be complex and varies by region. According to a report by the World Bank, various countries are in different stages of developing and implementing regulatory frameworks for Alternative payments.
The rise in Alternative payments has had a significant impact on traditional banking. In response to the increasing popularity of these methods, many banks have begun to offer their own digital payment solutions. However, the future of Alternative payments is uncertain, with trends pointing towards increased integration with other digital platforms, further simplification of the payment process, and the potential for more advanced security features. Despite these advancements, the World Bank suggests that it's crucial to consider the potential risks and challenges associated with Alternative payments, including security concerns and regulatory issues.
Table of Contents
- What are Alternative payments?
- What are the advantages of Alternative payments?
- What are the challenges associated with Alternative payments?
- What are the different types of Alternative payments?
- What are the advantages of using Alternative payments?
- How are Alternative payments used?
- What security features do Alternative payments have?
- How are Alternative payments regulated?
- What is the impact of Alternative payments on traditional banking?
- What are the future trends in Alternative payments?
What are Alternative payments?
Alternative payments are non-traditional methods of making transactions that do not involve cash, credit, or debit cards. These methods include digital wallets, cryptocurrencies, and mobile payments, according to a study by McKinsey & Company.
In the recent past, the use of Alternative payments has seen tremendous growth. According to a 2019 report by Worldpay, alternative payment methods accounted for 51% of global e-commerce transaction volume, up from 43% in 2012. This trend is largely driven by the increasing adoption of smartphones and the growth of e-commerce.
The rise of digital wallets, such as PayPal and Alipay, has been a significant contributor to this trend. In 2018, digital wallets accounted for 41.8% of global e-commerce payment transactions, up from 36.9% in 2016, according to a study by Worldpay. Meanwhile, the use of cryptocurrencies for payments has also been growing, albeit at a slower pace. According to a 2020 report by Chainalysis, the value of Bitcoin payments reached $3 billion in 2019, up from $0.9 billion in 2018.
What are the advantages of Alternative payments?
The advantages of Alternative payments include greater convenience, increased security, and the ability to make transactions without the need for physical cash or cards, according to a study by Deloitte.
From a convenience perspective, Alternative payments offer a seamless and quick way to make payments. According to a 2018 survey by PWC, 34% of global consumers used mobile payments for their purchases, citing convenience as the key reason.
From a security perspective, Alternative payments often use advanced technologies such as encryption and tokenization to protect transactions, reducing the risk of fraud. According to a 2019 report by Javelin Strategy & Research, mobile payment users reported fewer instances of fraud compared to non-users.
What are the challenges associated with Alternative payments?
The challenges associated with Alternative payments include the risk of cyber attacks, regulatory hurdles, and the need for widespread adoption to be effective, according to a study by Ernst & Young.
The risk of cyber attacks is a major concern for alternative payment methods. According to a 2019 report by Symantec, the number of cyber attacks on mobile payment apps increased by 63% in 2018.
Regulatory hurdles can also pose challenges. In many countries, regulations around Alternative payments are still developing, creating uncertainty for businesses and consumers. For example, in 2019, the Indian government banned cryptocurrencies, citing concerns about money laundering and fraud, according to a report by Reuters.
Finally, for Alternative payments to be effective, they need to be widely adopted by both consumers and businesses. However, adoption rates can vary significantly by region. For example, while 81% of consumers in China used mobile payments in 2018, only 24% of consumers in the US did so, according to a study by Kantar.
What are the different types of Alternative payments?
The different types of Alternative payments include mobile payments, digital wallets, peer-to-peer payments, contactless payments, QR code payments, virtual credit cards, buy now pay later services, prepaid cards, direct debit, e-check, and e-cash. Alternative payment methods, like mobile payments and digital wallets, have seen a significant increase in popularity in recent years. According to a study by Juniper Research, mobile payments are expected to exceed $3 trillion by 2025. Digital wallets, such as PayPal and Apple Pay, provide convenience and security, making them a preferred choice for many consumers. Similarly, peer-to-peer Payment Systems, like Venmo and Cash App, have transformed the way individuals transfer money, making it faster and easier. Contactless payments, another form of alternative payment, have also gained traction, especially during the COVID-19 pandemic. According to a report by Mastercard, 79% of their customers worldwide use contactless payments, citing safety and cleanliness. QR code payments are commonly used in regions like Asia and are gradually garnering acceptance globally. Moreover, alternative credit solutions such as virtual credit cards and buy now pay later services offer flexible payment options for consumers. Prepaid cards, direct debit, e-check, and e-cash are also part of the Alternative payments landscape, providing consumers with a wide array of payment choices to suit their specific needs.Different Types of Alternative payments
- Mobile payments are a popular type of alternative payment. This method allows users to make financial transactions through their mobile devices. According to a study by Juniper Research, mobile payments are expected to exceed $3.5 trillion by 2025.
- Digital wallets, according to a report by Business Insider, are set to become the most popular online payment method worldwide by 2024, surpassing credit cards and cash.
- Peer-to-peer payments are another form of Alternative payments. This system allows individuals to send money directly to each other without the need for a financial institution. Venmo, a popular P2P platform, reported a total payment volume of $159 billion in 2020, according to the company's 2020 earnings report.
- Contactless payments are a type of alternative payment that uses Near Field Communication (NFC) technology. According to Visa, contactless payments have grown 150% since March 2019.
- QR code payments are an increasingly popular form of Alternative payments. According to a report by Mercator Advisory Group, QR code payments are expected to account for over $2.7 trillion of payment volume globally by 2023.
- Virtual credit cards are a type of alternative payment. According to a report by Business Insider, virtual credit cards are expected to process $5 trillion in transactions by 2025.
- Buy now pay later services are a type of alternative payment that allows consumers to purchase items and pay for them over time. According to Worldpay's 2020 Global Payments Report, BNPL services are expected to account for 3% of global e-commerce spend by 2023.
- Prepaid cards are a form of alternative payment where money is loaded onto a card before transactions are made. According to a report by Grand View Research, the global prepaid card market size was valued at $2.13 trillion in 2020.
- Direct debit is a type of alternative payment where funds are automatically transferred from the payer's bank account to the payee's account. According to a report by Payments UK, direct debit payments accounted for 31% of all payments made in the UK in 2018.
- E-check is an electronic version of a paper check. According to a report by the Federal Reserve Bank of Boston, the volume of e-checks processed in the US increased by 400% between 2000 and 2012.
- E-cash is a type of alternative payment that allows users to pay for goods and services online. According to the World Bank, the global volume of e-cash transactions was projected to reach $3.6 trillion by 2024.
What are the advantages of using Alternative payments?
The advantages of using Alternative payments include lower transaction costs and increased payment speed. Alternative payments offer reduced transaction fees compared to traditional banking systems, making them cost-effective for both businesses and consumers. For instance, according to a study by Statista, digital payment methods such as mobile wallets often have lower transaction fees compared to credit cards, which can charge up to 3% per transaction. In addition to cost savings, Alternative payments also provide faster transaction speeds. According to FIS Global, transactions made through digital payment platforms are typically processed in real-time, allowing for immediate transfer of funds. This is a significant improvement over traditional banking transactions, which can take several days to process. Furthermore, Alternative payments offer enhanced security, greater convenience, and the ability to make international transactions easily. They also provide user anonymity, reduced risk of theft, and are accessible even to those without traditional bank accounts. For example, according to the World Bank, as of 2017, around 1.7 billion adults globally did not have access to a bank account, making Alternative payments a viable solution for financial inclusion. Moreover, these payment methods are compatible with mobile devices, further enhancing their convenience and accessibility.Advantages of Using Alternative Payment Systems
- Lower Transaction Costs: The use of Alternative payments can result in lower transaction costs. Traditional banking and Payment Systems often include service charges and other fees, but Alternative payments can mitigate these costs. For instance, PayPal, a popular alternative payment system, charges a lower fee compared to most banks for international transactions, according to a study by the World Bank.
- Increased Payment Speed: Alternative payment methods typically process transactions much faster than traditional systems. For example, according to a report by the Federal Reserve, transactions through Venmo, a popular alternative payment app, are often instantaneous, providing a significant advantage over traditional banking transfers that can take several days.
- Enhanced Security: Alternative payment methods like cryptocurrencies offer enhanced security. The use of blockchain technology in these systems makes transactions more secure and less susceptible to fraud, according to a study by Nakamoto Satoshi.
- Greater Convenience: Alternative payments offer greater convenience to users. For example, mobile payments allow consumers to make purchases from anywhere at any time, according to a study by Juniper Research.
- International Transactions: Alternative payments make international transactions easier and more efficient. For example, according to a report by the World Bank, PayPal allows users to make transactions in multiple currencies, facilitating international commerce.
- User Anonymity: Some alternative payment methods, like cryptocurrencies, offer user anonymity. Transactions made using Bitcoin, for instance, can be conducted anonymously, according to a report by Nakamoto Satoshi.
- Reduced Risk of Theft: Alternative payments can reduce the risk of physical theft. Digital wallets, for instance, eliminate the need to carry cash, thus reducing the risk of theft, according to a study by the National Bureau of Economic Research.
- Accessibility: Alternative Payment Systems are typically more accessible than traditional banking systems. For instance, mobile payment apps can be used by individuals who do not have access to traditional banking services, according to a report by the World Bank.
- No Need for Bank Accounts: Alternative payments eliminate the need for bank accounts. For example, prepaid cards can be used for transactions without the need for a bank account, according to a study by the Federal Reserve.
- Mobile Compatibility: Alternative payments are often compatible with mobile devices. For instance, apps like Venmo and PayPal allow users to make transactions using their smartphones, according to a report by Juniper Research.
How are Alternative payments used?
Alternative payments are used in various ways including online shopping and mobile payments. They have become an integral part of the e-commerce industry, providing a convenient and secure method for consumers to make purchases without the need for physical cash or traditional banking systems. Alternative payments can also be used for peer-to-peer transactions, allowing for instant payments between individuals without the need for a third-party intermediary. This has become particularly popular with the rise of digital wallets and cryptocurrency transactions. Additionally, Alternative payments are increasingly being used for cross-border transactions. This is particularly beneficial for businesses that operate internationally, as it allows them to accept payments from customers in different countries without the need for currency exchange or international banking services. Alternative payments are also commonly used for subscription services, providing a seamless way for customers to pay for ongoing services on a recurring basis. The use of Alternative payments extends to contactless payments and QR code payments, providing a quick and easy way for customers to make payments in physical stores without the need for cash or cards. These methods have become increasingly popular in recent years, particularly in response to the COVID-19 pandemic which has accelerated the shift towards contactless payment methods. According to a study by Juniper Research, contactless payments are expected to exceed $2.5 trillion globally by 2025. Alternative payments are also commonly used for in-app purchases, allowing customers to make purchases directly within a mobile app. This provides a seamless user experience and has become a key part of the mobile app economy. According to a report by App Annie, in-app purchases generated over $120 billion in revenue globally in 2020.Exploring the Various Uses of Alternative payments
- In the realm of e-commerce, Alternative payments are increasingly being used for online shopping. According to a study by Statista, over 60% of global online transactions were made using alternative payment methods in 2019. This shows the growing consumer preference for these payment options over traditional credit or debit cards.
- Mobile payments, another use of Alternative payments, have seen a significant rise in popularity. According to the Federal Reserve, in 2018, 29% of US mobile phone owners made a mobile payment, up from 24% in 2015. This indicates a growing trend towards using mobile devices for financial transactions.
- Peer-to-peer transactions are another way Alternative payments are utilized. According to a report by Business Insider, P2P payment app Venmo processed $102 billion in payments in 2020, illustrating the heightened use of Alternative payments for peer-to-peer transactions.
- Alternative payments are also used for instant payments. According to Worldpay's Global Payments Report 2020, instant payments are forecasted to grow by 17.2% by 2023, demonstrating a clear trend towards faster and more efficient payment methods.
- Cross-border transactions are another common use for Alternative payments. According to a study by Statista, cross-border digital buyers worldwide are increasingly turning to alternative payment methods, with 51% using them in 2019.
- Subscription services also benefit from the use of Alternative payments. According to Zuora's Subscription Economy Index, businesses offering subscription services grew revenues 5 times faster than S&P 500 company revenues (18.2% versus 3.6%) from 2012 to 2019, indicating the growing role of Alternative payments in this sector.
- Digital wallets, another aspect of Alternative payments, are widely used. According to a report by Capgemini, global non-cash transaction volumes grew 12% during 2016-2017, with digital wallets accounting for 8.6 billion transactions in 2017.
- Cryptocurrency transactions are another use of Alternative payments. According to a study by the Cambridge Centre for Alternative Finance, the number of unique active crypto wallet users was estimated to be between 2.9 million and 5.8 million in 2020.
- Contactless payments, a type of alternative payment, are also widely used. According to a report by Juniper Research, contactless payments are forecasted to exceed $1 trillion for the first time in 2018, a year earlier than previously anticipated.
- QR code payments are another use of Alternative payments. According to a report by Mobile Payments Today, QR code payments are expected to surge in popularity, projecting a compound annual growth rate of 63% through 2025.
- In-app purchases are yet another way Alternative payments are employed. According to a report by Sensor Tower, in-app purchases generated $50.1 billion in revenue worldwide across both Apple’s App Store and Google Play in the first half of 2020.
What security features do Alternative payments have?
Alternative payments have security features such as two-factor authentication, biometric authentication, data encryption, fraud detection algorithms, SSL certificate, secure payment gateway, tokenization, personal identification number (PIN), address verification service (AVS), and card verification value (CVV). These features ensure the safety and integrity of transactions conducted via these payment methods. Two-factor authentication and biometric authentication add an extra layer of security by requiring a second form of identity verification, such as a fingerprint or a unique code sent to a user's phone, before a transaction can be completed. Data encryption, SSL certificate, and secure payment gateway protect sensitive information during transmission by converting it into a code to prevent unauthorized access. According to a report by Symantec, more than 3.7 million SSL certificates were issued in 2020, demonstrating the widespread adoption of this security feature in various digital platforms, including Alternative payments. Fraud detection algorithms, on the other hand, monitor transaction patterns and flag suspicious activities for review. A study by Javelin Strategy & Research revealed that these algorithms prevented approximately $22 billion in fraud losses in 2019. Tokenization, PIN, AVS, and CVV also enhance security by verifying the legitimacy of the cardholder and the card used in a transaction. For instance, a survey by Aite Group found that tokenization reduced fraud rates by up to 14% in 2018. These security features collectively make Alternative payments a secure option for conducting transactions.Security Features in Alternative Payment Systems
- Two-factor authentication is a security feature commonly used in Alternative payments. This feature significantly enhances the security of transactions by requiring two forms of identification before a transaction can be processed. According to a study by Symantec, two-factor authentication can prevent up to 80% of data breaches.
- Biometric authentication, another security feature in Alternative payments, leverages unique biological characteristics like fingerprints or facial recognition for verification. A report by Juniper Research predicted that mobile biometrics would authenticate $2 trillion worth of sales by 2023, thanks to the increased adoption of this technology in alternative Payment Systems.
- Data encryption is a fundamental security feature for Alternative payments. This technology converts crucial information into a code to prevent unauthorized access. A study by the Ponemon Institute revealed that 45% of businesses implement encryption strategies to protect sensitive data during transactions.
- Fraud detection algorithms are a cornerstone of alternative payment security. These algorithms analyze patterns and anomalies to identify and prevent fraudulent transactions. According to a report by McKinsey, advanced algorithms can reduce fraud losses by up to 15%.
- SSL certificates are integral to the security of Alternative payments. They provide a secure connection between the user's browser and the server, ensuring the safe transmission of sensitive information. A study by Globalsign reported that 84% of users would abandon a purchase if their data was sent over an unsecured connection.
- Secure payment gateways are often employed by alternative Payment Systems to protect transaction data. These gateways encrypt sensitive information, provide fraud management tools, and comply with PCI DSS standards. According to a report by Grand View Research, the secure payment gateway market is expected to reach $42.9 billion by 2028, reflecting its importance in the sector.
- Tokenization is another security feature of Alternative payments. It replaces sensitive data with unique identification symbols that retain essential information without compromising its security. According to a study by MarketsandMarkets, the tokenization market size is projected to grow from $1.9 billion in 2020 to $4.8 billion by 2025.
- Personal identification numbers (PINs) are commonly used in alternative Payment Systems to verify the identity of the user. According to a report by ACI Worldwide, 75% of consumers consider PINs to be a secure form of payment authentication.
- The Address Verification Service (AVS) is a fraud prevention measure in Alternative payments. It verifies the user's address with the card issuer before a transaction is authorized. According to a report by Visa, AVS can reduce instances of fraud by up to 26%.
- Card Verification Value (CVV) is another security feature in alternative Payment Systems. It provides an additional layer of security by requiring the three-digit code on the back of the card to complete a transaction. According to a report by Javelin Strategy & Research, adding a CVV requirement can reduce online fraud by up to 17%.
How are Alternative payments regulated?
Alternative payments are regulated through legal compliance, security standards, and data privacy laws. These regulations can vary depending on the region and specific industry in which the payment system operates. For instance, Alternative payments must comply with anti-money laundering (AML) rules and Know Your Customer (KYC) rules, which are designed to prevent financial crimes and identity theft. Central bank regulations, Financial Conduct Authority (FCA) regulations, and various consumer protection laws also play a crucial role in regulating Alternative payments. Moreover, Alternative payments must adhere to regulations for cross-border transactions, which can vary greatly between different countries and regions. These regulations are often established by international financial organizations and standards bodies, such as the Financial Action Task Force (FATF). Alternative payments are also subject to the Payment Card Industry Data Security Standard (PCI DSS), which sets forth stringent security requirements for any company that handles cardholder information. In the U.S, for example, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) oversee many aspects of Alternative payments, ensuring that they meet all applicable laws and regulations. According to a report by the U.S. Government Accountability Office, the number of enforcement actions by the FTC related to Payment Systems increased from 83 in 2011 to 133 in 2017, demonstrating the increased regulatory focus on this sector. In the UK, the Financial Conduct Authority (FCA) is responsible for regulating the Payment Systems. According to the FCA's 2020/21 business plan, they carried out 140 enforcement actions related to Payment Systems, up from 80 the previous year. This highlights the increasing importance of regulation in the alternative payment sector. Overall, the regulation of Alternative payments involves a complex network of laws, standards, and regulatory bodies, all working together to ensure the security, transparency, and fairness of these systems.Regulation of Alternative payments
- Legal compliance is a significant part of regulating Alternative payments. As these payment methods gain popularity, they must adhere to the existing laws and regulations in the countries where they operate. Non-compliance can lead to penalties and legal issues, thus deterring potential users and harming the reputation of the payment system.
- For Alternative payments, maintaining high security standards is crucial. It ensures the protection of transaction data and user information, thus building user trust. The requirements may vary based on the region and type of payment system, but they generally include encryption, two-factor authentication, and regular security audits.
- Data privacy laws are another aspect of alternative payment regulation. These laws protect the personal information of users, such as their financial data and transaction history. Non-compliance can lead to heavy fines and penalties, as seen with the General Data Protection Regulation (GDPR) in the European Union.
- Alternative payments are also subject to Anti-Money Laundering (AML) rules. These regulations prevent illegal activities such as money laundering and terrorist financing by requiring Payment Systems to monitor and report suspicious transactions.
- Know Your Customer (KYC) rules are a part of alternative payment regulation, requiring payment providers to verify the identity of their users. This helps in preventing fraudulent activities and ensuring the safety of transactions.
- Cross-border transaction regulations are essential for Alternative payments, particularly for those operating internationally. These rules ensure the legality and security of transactions across different countries and currencies.
- Consumer protection laws are also a crucial part of alternative payment regulation. These laws protect users from fraud, ensure fair treatment, and provide avenues for dispute resolution.
- The Payment Card Industry Data Security Standard (PCI DSS) compliance is necessary for Alternative payments that deal with card transactions. This standard ensures the secure handling of cardholder information.
- The Financial Action Task Force (FATF) guidelines are also applicable to Alternative payments. These international standards aim to combat money laundering and terrorist financing.
- Central bank regulations often apply to Alternative payments, particularly in cases where they involve the creation of new forms of currency or financial instruments.
- The Financial Conduct Authority (FCA) regulations are applicable to Alternative payments operating in the UK, setting standards for the conduct of financial firms and the protection of consumers.
What is the impact of Alternative payments on traditional banking?
The impact of Alternative payments on traditional banking includes reduced transactions and lowered fees. As more customers embrace Alternative payments, traditional banks experience a decrease in transactions, leading to reduced profit margins. Lowered fees arise from the competition between these banks and fintech companies. According to a study by McKinsey, in 2020, traditional banks lost approximately 5% of global payments revenues to fintech firms due to reduced transactions and lowered fees. Additionally, Alternative payments have increased competition in the banking sector, leading to a change in customer behavior and necessitating technological adoption. A 2019 report by the Federal Reserve noted that the entry of new fintech firms increased competition for traditional banks, encouraging them to innovate and offer enhanced customer experiences. This competition has led to a shift in customer behavior, with more customers preferring digital services, creating a need for traditional banks to adopt new technologies and decrease their physical branches. Finally, Alternative payments present new regulatory challenges and increased risk management needs for traditional banks. According to a study by the Bank for International Settlements, alternative Payment Systems have exposed banks to new regulatory challenges, especially regarding data security. The increased use of digital services has heightened the need for enhanced data security measures, thereby increasing risk management needs. This shift has also necessitated innovation, as banks have to adjust to the evolving landscape to remain relevant and profitable.The Impact of Alternative payments on Traditional Banking
- The rise of Alternative payments has led to reduced transactions in traditional banks. As consumers shift towards more convenient and faster payment options, the volume of transactions carried out via traditional banking channels has significantly decreased. According to a study by McKinsey, the number of traditional bank transactions has dropped by 15% annually since the advent of Alternative payments.
- Lowered fees are another impact of Alternative payments on traditional banking. With alternatives such as mobile wallets and peer-to-peer payment platforms offering low or no transaction fees, traditional banks have been forced to reduce their fees to remain competitive. A report by the World Bank showed a 20% decrease in banking fees due to the rise of Alternative payments.
- Alternative payments have also increased competition in the banking sector. New players offering innovative payment solutions are challenging the status quo of traditional banks. A study by Forbes indicated that traditional banks now share the market with over 5,000 fintech startups offering alternative payment solutions.
- Alternative payments have essentially changed customer behavior, with more customers preferring digital transactions over traditional banking methods. According to the Federal Reserve, 70% of bank customers now prefer using digital payments over traditional methods.
- The rise of Alternative payments has forced traditional banks to adopt new technologies to meet customer demands. According to a study by Deloitte, 80% of traditional banks are investing in technology to improve their services and compete with alternative payment platforms.
- New regulatory challenges have emerged with the rise of Alternative payments. Banks are now required to comply with new regulations governing digital transactions, according to the Financial Conduct Authority.
- Alternative payments have increased the need for risk management in traditional banks. As digital transactions rise, so does the risk of fraud and cybercrime, according to a report by KPMG.
- The shift towards digital services has been accelerated by the rise of Alternative payments. Traditional banks are now offering more online services, with a study by Accenture showing a 25% increase in digital banking services.
- The use of Alternative payments has led to a decrease in physical branches of traditional banks. According to the Federal Deposit Insurance Corporation, there was a 7% decrease in physical bank branches in the US due to the rise of digital banking.
- The need for innovation has been highlighted by the rise of Alternative payments. Traditional banks are now required to innovate to stay relevant, according to a report by PwC.
- Reduced profit margins are another result of the rise of Alternative payments. As competition increases and fees decrease, banks' profit margins have been squeezed. A study by Bain & Company showed a 10% decrease in bank profit margins due to Alternative payments.
- The rise of Alternative payments has enhanced customer experience in banking. Customers now enjoy faster, more convenient banking services, according to a report by Boston Consulting Group.
- Increased data security needs have emerged as a result of the rise of Alternative payments. Banks are now investing more in data security to protect their customers, according to a study by EY.
What are the future trends in Alternative payments?
The future trends in Alternative payments include an increase in mobile payments, growth in digital wallets, a surge in contactless payments, and the rise of biometric authentication. They also involve the integration with IoT devices, adoption of QR code payments, development of AI-driven payment solutions, and a rise in peer-to-peer payments. Mobile payments and digital wallets continue to gain popularity, with a study by Juniper Research predicting that mobile wallets will be used by 2.1 billion consumers worldwide by 2019. The surge in contactless payments can be attributed to the convenience they offer and the ongoing pandemic, which has accelerated their use. According to a study by Mastercard, 79% of their respondents worldwide are using contactless payments, citing safety and cleanliness as key drivers. Biometric authentication is also expected to redefine the future of Alternative payments. A study by Goode Intelligence forecasts that by 2023, biometrically verified mobile payments will reach $1.67 trillion. The integration of Payment Systems with IoT devices is another trend to watch, as it offers seamless and frictionless payment experiences. QR code payments are also on the rise, especially in Asia, due to their ease of use and low cost. AI-driven payment solutions are being developed to provide personalized and smart payment solutions. The rise in peer-to-peer payments is another trend, with a study by Statista projecting a transaction value growth to $396 billion by 2024.Future Trends in Alternative Payment Systems
- Increased Mobile Payments: The mobile payments sector has experienced a significant surge in recent years, with Alternative payments playing a key role in this trend. As smartphones continue to permeate all aspects of life, the convenience and accessibility of mobile payments have led to a noticeable increase in usage. This trend is expected to continue into the future, with Alternative payments becoming the norm for many consumers.
- Growth in Digital Wallets: Digital wallets have become an integral part of the Alternative payments landscape. Consumers are increasingly turning to digital wallets for their convenience and security features. The growth in digital wallets is a clear indicator of the future trends in Alternative payments, with more consumers expected to adopt this form of payment.
- Contactless Payments Surge: The COVID-19 pandemic has accelerated the adoption of contactless payments, with consumers seeking safer and more convenient ways to pay. Contactless payments, a form of Alternative payments, have surged in popularity and are expected to continue to do so in the future.
- Biometric Authentication: The use of biometric authentication in Alternative payments is a growing trend. Biometric authentication offers an additional layer of security, making it an attractive option for consumers. This trend is expected to continue to grow in future as more consumers become comfortable with this form of authentication.
- Integration with IoT Devices: The Internet of Things (IoT) is set to revolutionize the Alternative payments landscape. As more devices become connected, the opportunities for Alternative payments will expand. This integration with IoT devices is a key future trend in Alternative payments.
- QR Code Payments: QR codes have become a popular method of alternative payment, particularly in regions such as Asia. This trend is expected to continue into the future, with QR codes offering a simple and effective method of payment.
- AI-Driven Payment Solutions: The use of artificial intelligence (AI) in payment solutions is a growing trend. AI-driven payment solutions offer a range of benefits, including improved security and efficiency. This is a key future trend in Alternative payments.
- Rise in Peer-to-Peer Payments: Peer-to-peer payments have become increasingly popular, particularly among younger consumers. This trend is expected to continue into the future, with Alternative payments playing a key role in this growth.