The digital payments market is expected to grow at a CAGR of 13.7% during the forecast period 2021 to 2026. The demand for cashless, cash payments is driven by greater convenience, favorable government policies and a changing consumer behavior.
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Governments are also trying to reduce their cost of printing currencies and counter the influx of fake currencies that is disrupting economic growth, with digitization, creating an enabling environment for cashless and digital payments.
– In addition, the rapid increase in the penetration of smartphones in emerging economies, mainly in the Asia-Pacific region, is expected to have a positive impact on the growth of the market. In addition, the introduction of mobile wallets across the world, in which a consumer is asked to add money to the app and use it later inside or outside the merchant (the where applicable), rapidly propels the adoption of digital payment services.
– Global demand for smartphones is increasing dramatically and with technological advancements such as 5G, the number of smartphones in the world is expected to increase further. According to Ericsson, in 2019, global smartphone subscriptions were 5.6 billion and are expected to reach 7.4 billion by 2025, or 84% of all subscriptions. It is another major driving force for the market.
– In addition, China spends a lot on payment services. For example, WeChat Pay allows a customer to pay quickly through an integrated service and connected banks, book hotels, flights, trains, and purchase movie tickets. According to ITU, Internet penetration was highest in Japan in January 2019 at 93.4%, which is expected to continue, due to favorable government standards and associated regulations. Currently, India has a relatively low penetration rate compared to Japan and China. However, this is expected to increase, due to the rise in smartphone users and the government pushing towards digital payment wallet services.
– Facebook, through its WhatsApp application, is trying to offer digital payment services, and has already tested it for mass distribution by the fourth quarter of 2019. The number of users and the transaction value of Chinese digital commerce have overtaken those of the United States, thanks to Chinese digital technology. payment service companies forming alliances around the world. WeChat and Alipay are just a few of the popular apps that Chinese citizens use to pay for their expenses when visiting abroad.
– Retail stores and services around the world are rapidly adopting and integrating mobile payment apps, such as PayPal, Samsung Pay, Apple Pay, AliPay, and WeChat Pay, to accept payments. Due to changing lifestyles, daily commerce and the rapid growth of online retail, this trend is expected to continue over the next six years.
– The growing number of government initiatives to promote the digital economy and reduce the use of cash has led to an increase in transactions through electronic wallets and ATMs. For example, in July 2019, India’s Ministry of Finance announced that no Merchant Discount Rate (MDR) would be imposed on merchants allowing their customers to make payments through “ payment methods. low-cost digital payments ”.
– The COVID-19 pandemic has led to the application of social distancing, lockdowns and other measures in the regions. It has also led consumers to increasingly depend on the use of the internet, online streaming of videos and movies, and the biggest shift in online shopping.
– The global nature of COVID-19 and its impact on electronic commerce are therefore likely to encourage enhanced international cooperation and the further development of online purchasing and supply policies. The pandemic has made it clear that e-commerce can be an important tool / solution, especially as online sales can support small and medium-sized businesses, which are the backbone of some economies.
Main market trends
Contactless payment to drive market growth
– Contactless payment is an alternative payment channel. It uses short-range wireless technology, such as radio frequency identification (RFID) or near field communication (NFC), to make payments securely between the contactless card and the contactless PoS terminal.
– Factors driving the use of contactless payment include, but not limited to, ease of use, a faster, more integrated and seamless experience. For example, contactless transactions take almost a tenth of the time that traditional electronic transactions take. According to Capgemini, customer confidence in the security of contactless payments is increasing, with enhanced device security features, such as biometrics and cryptography. In addition, customers can now use contactless payments for amounts up to 30 GBP, without verification (or higher amounts with customer verification, such as password or fingerprint), with a terminal of contactless payment.
– Contactless payments eliminate cash as it is a simpler, safer and faster method of payment in comparison. In the UK, payment cards have seen steady and sustained growth, and debit cards have recently taken over from cash as the most popular payment method. In purchasing, the use of payment cards has grown, as has contactless card payment methods.
– For example, according to UK Finance, contactless payments accounted for 38% of all in-store card payments in October 2017, up from 24% in October 2016. The contactless mobile user base grew by around 450 million in departure from 2019. Still according to the same source, in December 2019, the value of contactless card transactions stood at £ 7.4 billion in the United Kingdom, the highest value posted during the period under observation.
– With the emergence of communication technologies, such as NFC which consumes less power when active, the possibilities of contactless payment have improved, as they tackle the problems of higher power consumption in other contactless cards. The widespread adoption of contactless payments in the UK has been gradual and has now become the world leader in contactless payments. In addition, in the United Kingdom in 2018, one in three card payments were made without contact.
India will represent the largest share of the Asia-Pacific region
– Digital payments are a relatively new trend in India. However, it is growing at a rapid pace due to the favorable regulatory environment, infrastructure upgrades, high smartphone penetration, and subsidized data plans. ?
– The reason for the high adoption of smartphones is the launch of affordable phones by Chinese brands that offer top-notch features and capabilities. The target market for these brands is also rural India, which is looking to upgrade its multifunction phones. Thus, more and more Indians rely on applications for facilities, such as groceries or fuel management. This is a facilitator for mobile payments. ?
– Demonetization was a massive currency slaughter exercise taken over by the government, which invalidated 86% of the currency in circulation. Measures have been taken to combat black currency, the financing of terrorism and counterfeiting of currency. This has been a major driver for the adoption of digital payments. ?
– The Digital India program is a flagship program of the Indian government whose vision is to transform India into a society with digital autonomy. The Ministry of Electronics and Information Technology (MeitY) is working to strengthen digital payment infrastructure and raise awareness through the promotion of digital payments. ?
The digital payments market is moderately concentrated. Competitive rivalry in the studied market is moderate, because a good number of players prevail. Despite the existence of several companies in the studied market, companies are required to continue to innovate in their products, in order to acquire a sustainable competitive advantage over their competitors and to differentiate their products.
– April 2020 – Amazon India plans to extend interest-free credit to customers to purchase products on its platform or pay bills, partnering with lenders, such as Capital Float and Karur Vysya Bank, for the initiative. The service will allow consumers to purchase essential products on Amazon’s platform.
– April 2020 – Paytm Payments Bank has partnered with Mastercard to issue virtual and physical debit cards. The deal will see the bank’s beta customers issue cards in a first rollout, followed by its entire user base in no time.
– February 2020 – Paypal Holdings Inc. announced the launch of a peer-to-peer (P2P) payment feature in India. The service is based on Universal Payments Interface (UPI), India’s indigenous digital payment network, and will be rolled out in the near future.
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