Three trends to watch in payments over 2022

- By Collaborative Media & Publishing
Payments are at the heart of the post-COVID digital revolution that is transforming the world.

It is prompting new business practices that are making life easier for consumers and prompting governments to create new regulatory frameworks, strengthening the global economy.

This steep pace of change is set to continue with three key trends reshaping the payments sector into the new year.

Real-time digital payments set to expand

The impact of real-time payment services such as Osko will continue to grow as more data is attached to transactions and cross-border transactions in real-time become a reality.

The real-time nature of payments is already helping businesses receive money faster and Australians receive disaster payments such as COVID-19 subsidies more quickly.

The ability to include more data –such as invoices, receipts, and statements – alongside those payments will make digital payments even more attractive compared to cash.

Real-time payment services around the world are also starting to be linked, paving the way for faster cross-border transactions.

"We'll start to see that becoming more prevalent when different countries' real-time services are integrated on the back of the ISO 20022 standard," BPAY Group Chief Customer Officer Keith Brown says. "There's been a number of tests happening between countries such as Australia and Singapore."

The coronavirus pandemic, which has made QR Code check-ins normal, may also prompt a faster take-up of QR Codes for payments with data.

"If you can leverage QR codes to store a receipt of the transaction and use it to link to a rewards account in a digital wallet, then it paves the way for a new ecosystem," Brown says.

Central bank digital currencies and cryptocurrencies to go mainstream

The nature of digital transactions is set to be reshaped further as central banks around the world investigate launching central bank digital currencies (CBDCs) and cryptocurrencies enter the mainstream.

"Once cryptocurrencies get into big organisations like major banks, then your average person will start to use them," Brown says. "At the moment it's probably the younger demographic using it as an investment more than a real currency."

The Australian government recently announced plans to establish a licencing framework for Digital Currency Exchanges along with stronger consumer safeguards.

More than 800,000 Australians have transacted in digital assets in the last three years, with a 63% increase in 2021 compared with 2020, according to the government.

While cryptocurrencies are becoming more popular, CBDCs may have an even bigger impact. By the end of 2022, the government expects to have received advice from Treasury and the RBA about the feasibility of a retail CBDC.

"It's moving digital currencies from an investment to usable in the real world," Brown says. "I think it's going to happen – it's just when and how, and what it means for cash."

Many central banks are studying CBDCs, with China expected to be the first major country to launch its own CBDC.

CBDCs could generate multiple benefits, including for global trade. For example, a network of CBDCs could save global companies up to US$100 billion in transaction costs each year, according to a joint research report by Oliver Wyman and J.P. Morgan.

Multiple uses for digital IDs as cash use declines

Digital transactions have largely replaced cash, which now accounts for less than one-third of consumer payments compared to two-thirds about a decade ago, according to a government report[1].

"Cash is no longer being used for those small transactions because stores were not going to accept it with COVID-19 for hygiene purposes. In that context, in day-to-day life, maybe cash will effectively disappear," says Brown.

But the ongoing rise of digital payments is also prompting a greater need for digital IDs. Brown says a digital ID could be stored on a mobile phone and used for a variety of purposes in the same way as COVID-19 vaccine certificates.

"People are more accepting of digital identity and I think that will accelerate next year as governments are particularly keen on moving down that path," he says.

Apple is working with several US states to add their driver’s license or state ID to their digital wallet, while Mastercard bought digital ID company Ekata for US$850 million in April 2019.  

In Australia a number of organisations including BPAY Group and Eftpos are looking at taking digital identity solutions to market in the near future.

Stronger digital ID can help prevent online fraud but it can also help make basic transactions more streamlined, Brown says.

"There's a move to efficiency, whether you're signing up for a bank account or trying to get a loan. You're looking to transact online and make those processes more efficient for consumers."
 
[1] Transforming Australia’s Payments System | Treasury.gov.au. (2021, December 09). Retrieved from https://treasury.gov.au/publication/p2021-231824

Published by BPAY Pty Ltd (ABN 69 079 137 518) email: marketing@bpay.com.au. The BPAY Scheme is managed by BPAY Pty Limited.  When you use BPAY payment products, the BPAY Scheme is paid fees relating to processing costs and BPAY Scheme membership.  Contact your financial institution to see if it offers BPAY payment products and to get the Product Disclosure Statement.  Any financial product advice provided by BPAY Pty Limited in relation to BPAY payment products is general advice only and has been prepared without taking into account your objectives, financial situation or needs.  Before acting on such advice, you should review the Product Disclosure.

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