Digital Payments Market

Market Overview

The global digital payments market had a revenue holding of USD 75.34 billion in 2022 and is projected to reach USD 100.2 billion in 2023. It is expected to reach USD 399 billion by 2031, growing at a CAGR of 16.8% during the forecast period (2023–2031).

The increasing proliferation of smartphones, expanding businesses, and consumer inclination for digital change, the world of payments and transactions is evolving quickly. Digitization of payments and transactions continues to be a growing trend as organizations and customers want to navigate highly secure digital environments while enjoying seamless user experiences. The market for digital payments includes all of these transactions and related goods and services. Digital payments are a payment method that uses digital channels such as the internet, mobile phones, and automated devices to transmit and receive money. When sending and receiving money, both the payer and the payee must utilize digital methods, albeit in some cases, the payee's usage of a digital method is optional.

Rapid onboarding and user-friendliness are expected to drive the digital payments market. Individuals need adaptability, openness, and hassle-free onboarding. They are increasingly drawn to frictionless approaches; thus, software innovators like Square and PayPal use automation to reduce the onboarding process's duration to a few minutes. To diversify their products in electronic payments, e-commerce enterprises are also working to implement their point-of-sale systems. For instance, retail behemoths Shopify and Amazon are working on point-of-sale systems that can handle in-person and online sales. These advances motivate banks to enhance their digital payment systems to maintain market positions. Global 5G network deployment is also anticipated to fuel market expansion. Due to robust network access, people may conveniently use mobile devices to make payments and online purchases.

Market Dynamics

Driver

• Increased Usage of Smartphones and Digital Initiatives

The rise in popularity of numerous critical operating systems, most notably Android and iOS, is responsible for expanding the smartphone market. Google's Android is one of the most widely used smartphone operating systems worldwide. The popularity of Android OS among consumers is increased by the availability of several features in Android smartphones. Due to its widespread use, numerous smartphone manufacturers are switching to Android as their operating system. Thus, it is anticipated that the digital payment market will expand due to the rising demand for and the introduction of numerous Android-based smartphones. Ericsson estimates that smartphone subscriptions will increase by several hundred million over the next few years. There are currently over six billion smartphone subscriptions globally.

Additionally, it is anticipated that rising demand from developing nations in several regions, including India and Indonesia, where smartphones are increasingly encroaching on rural areas as local governments push for a digital mobile economy, will fuel demand for smartphones at the entry-level price point. Governments worldwide also impose ICT technology to advance economies into the digital sphere. They are taking several actions to digitize the payment process. The market for digital payments is one of the nation's economic growth imperatives. It can assist raise productivity and economic growth, tax income, transparency, new business prospects, and end-user financial inclusion. The development of UPI or Unified Payments Interface, Digital India, and the 14444-helpline number are just a few initiatives the Indian government has launched to support the digital payments market. These programs support digitization and raise awareness of the advantages of using new technologies.

Restrain

• Growing Cyberattacks

Cyberattacks are a significant barrier to the expansion of the market for solutions for digital payments. The payment industry has been dealing with cyber-attacks as its most severe issue for over a decade. In the digital payments market, the increasing technology usage is also causing cybersecurity concerns, including fraud and cybercrime. Concerns and dangers related to privacy, regulatory compliance, and theft have increased due to enterprises adopting payment industry technologies and integrating them into their operations. Businesses are vulnerable to evolving cyberattacks that use mobile malware to access payment systems and steal cardholder data. Some developing frauds include affiliate fraud, botnets, friendly fraud, velocity attacks, phishing, and triangulation.

Opportunity

• Unbanked Population

A significant proportion of the global population resides in rural and isolated areas. Connectivity and digital literacy are lacking among this demographic. Governments, development organizations, and private sector participants acknowledge the necessity of financial services for a sizable population residing in rural and distant areas. Consequently, more individuals can receive financial help. Governments attempt to start several projects to connect these populations to promote financial inclusion.

As of 2022, India had the most digital banking customers worldwide. India had 295.5 million users, 70 million more than the U.S., which ranked second. Digital banking was especially popular in India and the U.S. Forbes reports that most Americans support digital banking. Only 29% of U.S. citizens prefer to bank in person, while 78% prefer mobile apps or websites as of 2022.

Digital payments are crucial in boosting the number of people with bank accounts since they make it possible to open and manage accounts even in remote locations using a mobile phone. The advent of digital wallets is having a significant influence and promoting financial inclusion. As a result, the world's unbanked population is declining, creating a favorable atmosphere for digital payment companies to grow their clientele.

Regional Analysis

Dominance of Asia-Pacific Over Other Regions

By region, the global digital payments market comprises North America, Europe, Asia-Pacific, and LAMEA.

Asia-Pacific will command the leading market share, growing at a CAGR of 13.25% over the forecast period. The countries in the region have launched significant attempts to improve the payments industry. For instance, the 11 Asian nations that make up the Asian Payments Network (APN) have joined forces to encourage international banking transactions in the region. These nations are the Philippines, China, Singapore, Malaysia, Thailand, Vietnam, Indonesia, South Korea, Japan, New Zealand, and Australia. China and India are anticipated to establish a larger market. The widespread use of smartphones and bank accounts in China is the main factor propelling the growth of digital payments.

In addition, Chinese banks are working with other parties to facilitate cross-border payments. For instance, Payment, a platform for card-to-card and international payments, and Tencent Holdings' FinTech business partnered to build a technology that allows users to receive money via Tencent's WeChat service in December 2021. Additionally, the Government of India's main program, Digital India, aims to convert India into a society where everyone can access the internet. The Ministry of Electronics and Information Technology seeks to improve the infrastructure for digital payments and raise awareness by promoting them.

North America is expected to grow at the fastest CAGR of CAGR of 12.25% in digital payment market. Emerging and gaining traction on the digital payment market of the region are novel payment technologies including cloud computing, biometric authentication, artificial intelligence, and blockchain. The aforementioned technologies are designed to improve the user experience, security, and efficiency of digital payments. For example, biometric authentication verifies the identity of the recipient or payee through the use of facial recognition, iris scanning, or fingerprints.

With the enhancement of the digital payment experience, e-commerce sales in the region are also rising. This rise also reflects customers' growing familiarity with online buying and the rise in handheld and mobile device usage. Additionally, Google has encouraged the US Fed to use the UPI paradigm of digital payments. The second-largest digital payments market in the world by revenue, the United States, has seen growth in recent years, according to Infibeam Avenues Ltd, a provider of corporate software platforms and digital payment solutions. The modernization of payment systems, domestic and foreign payment innovations, payment service providers, and regulatory initiatives to restructure the payments sector for the future continue to impact the Canadian digital payment market. All these aspects boost the North American digital payments market.

Segmental Analysis

The global digital payments market is classified based on the mode of payment, end-user, and region.

By Mode of Payment

the global digital payments market comprises Point of Sale and Online Sale.

The Online Sale section is projected to advance at a CAGR of 7.54% and hold the largest market share over the forecast period. Due to digitalization, the means of payment for online sales are expanding at an unprecedented rate. The expansion of online sale payments is anticipated to be remarkable as a rising number of nations are eager to embrace digitization. The market for online payments has grown as cell phones have become more and more widespread over the past ten years. Web-based and net banking transactions account for a sizeable portion of all trades. However, bank transfers are still favored for significant payments and cross-border transactions because they are subject to different rules and restrictions worldwide. In addition, several digital payment transaction service providers run websites to draw specific customer demographics.

The Point of Sale section will hold the second-largest market share. Smartphone technology advancements have made it possible to conduct point-of-sale transactions at retail terminals while on the go, driving global market expansion. Globally, businesses and services have quickly implemented mobile payment systems like PayPal, Samsung Pay, AliPay, Apple Pay, and WeChat Pay to take payments. This trend is anticipated to continue for the duration of the forecast period due to changing lifestyles, everyday commerce, and the rapid development of mobile payments. A large user base of smartphones, whose development is anticipated to drive the market's growth throughout the projection period, can be credited with the growth of digital payments.

By End-User

The global digital payments market comprises Retail, Entertainment, Healthcare, Hospitality, and Others.

The Retail section is projected to advance at a CAGR of 12.2% and hold the largest market share over the forecast period. As customer behavior changes, so do the payment market. A few trends influencing the payment market are the cashless economy, mobile banking, instant payments, digital commerce, and the expanding influence of regulatory authorities. One of the key drivers fueling the segment's growth is the increasing adoption of mobile-based payment solutions by consumers for retail payments. The market is expanding concurrently with a rise in the number of unmanned retail locations around the world. Additionally, the e-commerce industry is experiencing a surge in demand as customers order necessities like food, clothing, and other things through e-commerce websites. Most customers prefer digital means of payment.

The Healthcare section will hold the second-largest share. Government initiatives to enhance infrastructure and the rise in patients, which causes long lines, are the main factors driving the use of digital payment in hospitals. Additionally, having a user-friendly digital payment option might be a positive move to promote wider acceptance of digital payments across a range of age groups due to the aging population in many nations. Additionally, the pandemic expedited numerous consumer-focused technology innovations in healthcare, such as telehealth and contactless payment alternatives. According to a survey by InstaMed published in 2021, 85% of respondents prefer using an electronic payment method for medical bills and premiums, and 82% wish to consolidate all of their healthcare payments.

Recent Developments

• In June 2023: PayPal Holdings, Inc. and KKR, a leading global investment firm, signed an exclusive multi-year agreement for a EUR 3 billion (USD 3.37 billion) replenishing loan commitment under which KKR private credit funds and accounts will purchase up to EUR 40 billion (USD 44.87 billion) of PayPal buy now, pay later (BNPL) loan receivables in Italy, France, the UK, Spain, and Germany.
• In February 2023: HDFC Bank and Crunchfish launched OfflinePay, an RBI Regulatory Sandbox Program project, to explore offline digital payments for merchants and customers.