The Ascendancy of Digital Payments
Digital payments have swiftly transitioned from a budding trend to a dominant force in both online and physical retail, eclipsing traditional payment methods such as cash and cards. This evolution underscores a fundamental shift in how consumers engage with commerce.
In 2014, digital payments – encompassing a broad spectrum of options including digital wallets, A2A transfers, buy now, pay later (BNPL) services, and cryptocurrencies – accounted for a significant 34% of e-commerce value. By 2024, this share had nearly doubled, reaching an impressive 66%, signifying the remarkable transformation in consumer behavior and preference. This substantial increase highlights the growing reliance on digital solutions for online transactions.
This transformative trend is equally apparent in point-of-sale (POS) transactions, where digital payments have experienced substantial growth. In 2014, digital payments represented a mere 3% of POS value, indicating their limited presence in physical stores. However, a decade later, this share had surged nearly tenfold, reaching 38%, signifying the increasing acceptance and convenience of digital payment options in brick-and-mortar environments. This growth underscores the expanding role of digital payments in everyday consumer purchases.
Looking ahead, forecasts predict that this upward trajectory will continue, further solidifying the dominance of digital payments in the global economy. By 2030, digital payments are projected to represent a staggering 79% of global e-commerce value, translating to an estimated US$8.6 trillion in online spending. This projection underscores the immense potential for continued growth in the digital payments sector. Furthermore, they are expected to account for 53% of in-store spending, solidifying their position as the preferred payment method for consumers worldwide. This forecast highlights the long-term trend towards greater adoption of digital payments across all retail channels.
Fintech Companies: Catalysts of Innovation
Fintech companies have emerged as pivotal drivers of innovation in the global payments landscape, fundamentally altering how consumers interact with financial services. These companies have disrupted traditional banking models and introduced new, user-centric solutions that are reshaping the financial industry. Major players such as Alibaba, Apple, and Google have revolutionized the payment landscape by introducing user-friendly and efficient digital wallets, making it easier for consumers to manage their finances and make transactions.
These digital wallets have gained widespread adoption globally, accounting for 53% of e-commerce transactions and 32% of POS spending in 2024. This widespread use reflects the convenience and ease of use that digital wallets offer. Their total value reached an impressive US$15.7 trillion last year, a tenfold increase from US$1.6 trillion in 2014. This staggering growth underscores the transformative impact of digital wallets on the payment ecosystem and highlights their increasing importance in the financial lives of consumers.
Fintech innovators like Affirm, Afterpay, Klarna, and PayPal have also revolutionized consumer credit with buy now, pay later (BNPL) offerings. These solutions have experienced exponential growth in popularity over the past decade, increasing from just US$2.3 billion in e-commerce transaction value globally in 2014 to a remarkable US$342 billion by 2024. This growth demonstrates the appeal of BNPL services to consumers seeking flexible payment options.
Looking ahead, BNPL is projected to maintain a compound annual growth rate (CAGR) of 9% through 2030, reaching approximately US$580 billion. This forecast indicates the continued popularity and expansion of BNPL services in the coming years. Meanwhile, total consumer spending through digital wallets is expected to surpass US$28 trillion by 2030, further solidifying their dominance in the payment landscape and underscoring their pivotal role in the future of finance.
The Rise of A2A Transactions: Powered by Real-Time Payment Rails
A2A payments have witnessed a significant surge in usage, fueled by the rise of instant or real-time payment systems. These systems allow for immediate transfer of funds between accounts, making transactions faster and more efficient. In e-commerce alone, A2A payments experienced an astounding 515% growth between 2014 and 2024, soaring from US$152 billion to US$936 billion. This substantial growth highlights the increasing preference for A2A payments among consumers and businesses.
This surge is primarily driven by the increasing adoption of instant or real-time payment systems. Across the 40 markets covered in a global payments report, 20 have successfully launched fast payment platforms in the past decade, highlighting the accelerating trend towards real-time transactions. These systems facilitate instant and secure transactions, improving cash flow, reducing processing delays, and fostering financial innovation. The widespread adoption of these systems underscores their benefits for both consumers and businesses.
Emerging markets are leading the way in this space, with Brazil’s Pix serving as a prominent example. Launched in November 2020, Pix has rapidly gained traction due to strong backing from the central bank, a consistent user experience, and relatively low costs for merchants. Today, three in four Brazilians use the system, and the value of Pix transactions now exceeds that of cards in online payments. Pix has also significantly impacted cash usage, with cash’s share of POS transaction value in Brazil dropping from 35% to just 17% between 2020 and 2024. This dramatic shift highlights the transformative potential of real-time payment systems.
In Brazil, Pix has played a crucial role in fueling the rise of A2A payments. In 2024, A2A e-commerce payment value in Brazil reached US$35 billion, a remarkable 35-fold increase from a mere US$1.2 billion in 2014. This staggering growth underscores the impact of Pix on the Brazilian payment landscape.
The Enduring Role of Payment Cards
Despite increasing competition from digital-first payment innovations, payment cards continue to hold a central position in the global payment ecosystem. This enduring relevance is due in part to the widespread acceptance of cards and their established infrastructure. This is partially due to the integration of new technologies and features by card networks and issuers, aimed at aligning with evolving consumer expectations. Card networks are continuously innovating to enhance security, convenience, and user experience.
Click to Pay, for example, represents a standardized, secure online payment system designed to streamline and unify the checkout experience across websites and devices, mirroring the functionality of chip cards and contactless payments in the physical world. Click to Pay was developed by EMVCo, a global technical body collectively owned by major payment networks including Visa, Mastercard, American Express, and UnionPay. This initiative aims to provide a consistent and secure online payment experience for consumers.
Another innovation is Visa Flexible Credential (VFC), a digital payment innovation from Visa that allows a single digital card to hold and access multiple payment types or accounts, including credit and debit cards, BNPL, and rewards points. This offers consumers greater flexibility and control over their payment options. VFC allows consumers to manage their various payment methods through a single digital card.
Paze, a digital checkout solution, enables consumers to make secure online purchases without sharing their actual card numbers with merchants, enhancing security and privacy. It was created by Early Warning Services, a consortium of US banks that also manages the Zelle inter-bank payment network. Paze provides an additional layer of security by protecting consumers’ card details during online transactions.
In 2024, credit, debit, and prepaid cards accounted for 45% of total global transaction value across both e-commerce and POS channels. However, this figure understates the full impact of cards, as they also serve as the underlying funding source for many digital wallets. Cards are often used to fund digital wallets, further extending their reach. A global survey revealed that 56% of consumers fund their digital wallets with credit or debit cards. This highlights the crucial role that cards play in the digital payments ecosystem.
When factoring in both direct card use and indirect use via digital wallets, cards are estimated to be responsible for approximately 65% of global consumer spending in 2024, amounting to an estimated US$29 trillion. This substantial figure underscores the enduring power and relevance of payment cards.
Looking ahead, that value is projected to account for 56% of global consumer payment value by 2030, reaching an estimated US$32.5 trillion, demonstrating the enduring power and relevance of payment cards in the evolving payment landscape. While digital payments are growing rapidly, cards are expected to remain a significant force in the global payment ecosystem.
The Continued Decline of Cash Usage
The global shift towards digital payments has directly impacted cash usage. The convenience and efficiency of digital payments have led to a decline in the use of cash. Over the past decade, the share of cash payments has plummeted, falling from 44% of in-store spending in 2014 (slightly more than US$16 trillion) to just 15% in 2024, representing a US$10.5 trillion reduction in value. This dramatic decline highlights the increasing preference for digital payment methods.
Despite this steep decline, cash remains a critical payment method in many communities. Cash provides a level of anonymity and is often preferred by individuals who lack access to banking services. This is especially evident in countries like Colombia, Indonesia, Japan, Mexico, Nigeria, Peru, Philippines, Spain, and Vietnam, where cash remained the leading in-person payment method in 2024. In these countries, cash continues to play a vital role in everyday transactions.
Even in markets like the Nordic countries, often considered among the most advanced in terms of cashless societies, cash use still remains relevant, accounting for between 5% and 7% of POS transaction value in 2024. This highlights the persistence of cash as a payment option, even in digitally advanced economies. Cash continues to serve as a backup payment method and is used for small transactions.
Forecasts predict that cash use will continue to decline, though at a slower pace. While the decline in cash usage is expected to continue, it will likely be gradual. From 2024 to 2030, global cash usage is expected to decrease at a CAGR of 2%, reaching a share of global POS value of 11% by then, or just under US$5 trillion. This forecast indicates that cash will remain a part of the payment landscape, albeit a smaller one.
Cryptocurrencies and Embedded Finance: Shaping the Future of Payments
Looking ahead, trends including embedded finance and novel technologies such as cryptocurrencies are expected to shape the payment landscape in the coming years. These emerging trends have the potential to revolutionize the way we transact and interact with financial services.
Global crypto spend is projected to more than double over the next five years, from US$16 billion in 2024 to US$38 billion in 2030, indicating growing acceptance and utilization of cryptocurrencies for transactions. As cryptocurrencies become more mainstream, their use in everyday transactions is expected to increase.
Embedded finance is also poised for significant growth. Embedded finance refers to the integration of financial services into non-financial platforms and applications. McKinsey estimates that by 2030, the embedded finance market in Europe will exceed EUR 100 billion, accounting for 10% to 15% of banking revenue pools. This marks a substantial increase from 2023, during which the market generated between EUR 20 billion and EUR 30 billion, or approximately 3% of total banking revenues. The growth of embedded finance is driven by the increasing demand for seamless and integrated financial experiences.
On a global scale, the embedded finance market is expected to reach US$7.2 trillion in size by 2030, according to a report by Dealroom and ABN AMRO Ventures. This underscores the immense potential of embedded finance to transform the financial services industry and reshape the way consumers interact with financial products and services. Embedded finance is expected to become a significant part of the financial landscape, offering consumers greater convenience and personalization.
The convergence of A2A transactions, the proliferation of mobile wallets, and the innovative power of tech giants are revolutionizing the digital payments landscape. As we move forward, emerging technologies like cryptocurrencies and embedded finance will further refine and enhance the ways people transact, pushing the world towards a more digitized financial future. The trends outlined above are not merely fleeting fads, but rather foundational shifts that will redefine the future of payments for years to come. The future of payments is likely to be characterized by greater digitization, personalization, and convenience.