What’s Next in Payments?
5 trends to watch in the coming years
Customers have long used peer-to-peer (P2P) payment solutions as an easy way to split bills and send money back and forth. P2P solutions allow customers to send and receive money instantly using their favorite mobile devices, rather than sharing physical cash.
However, P2P solutions are being embraced rapidly as a way to send money to businesses too. Innovative payment solutions like Square allow businesses to accept payments via P2P services, providing an alternative to paying via cash or card.
Using P2P payment solutions offers several benefits for businesses and consumers alike. They’re fast and convenient, allowing customers to pay with their favorite mobile device, often via an app they’re already familiar with. Since P2P solutions come with their own layers of security, businesses can receive payments while keeping customers’ information safe.
According to a recent report by the Federal Reserve, the share of P2P payments by consumers continues to increase. 19 This same report shows that by 2022, payment apps accounted for half of all P2P transactions.
Cryptocurrency continues its move toward the mainstream. An estimated four in 10 American adults now own some form of crypto. 20 And as more users embrace these alternative currencies, sellers can set themselves apart by allowing customers to pay with them.
Cryptocurrency payments offer several advantages to your business, including increased security and reduced fraud. That's because crypto payments don't have to be verified by a third party, which significantly reduces the risk of identity theft. Also, crypto payments are irreversible which means a refund would require a separate payment back to the customer's crypto wallet. 21 But there are risks, too. Cryptocurrency values can be subject to volatility, making them highly unpredictable when compared to the U.S. dollar. Those price changes can make properly accounting for cryptocurrency purchases complicated when it's time to do your business's taxes.
Greg Salvatori, owner of Greg Salvatori Gallery in Provincetown, Massachusetts, accepts crypto payments to make the buying experience seamless for customers. He offers crypto payments through the cryptocurrency wallet MetaMask. “It’s always younger [clientele], like the 28-to-40 bracket,” Salvatori said of those who tend to use crypto payments the most.
While the money is the important part of your business, the interaction for someone buying a $25,000 art piece is supposed to be about the art.It’s supposed to be about them and not about a [point of sale] that doesn’t work. It’s about the customer’s desire to buy themselves, or their loved ones, something special, and their mind can stay in that emotion instead of worrying about the credit card.”
Biometric payments are payments that use biometric authentication before processing. Biometric authentication can include 3D facial recognition; vein recognition; behavioral biometrics, such as voice and typing patterns; and inputs, such as a fingerprint. These payment types are becoming more and more commonplace because they involve features that are more secure and harder to replicate.
Thanks to the iPhone and other smart devices, biometric payments are more commonplace than we realize. For instance, in order to access Tap to Pay for iPhone, your device prompts you to use your Face ID (depending on your settings) before processing a payment. This allows customer transactions to be more secure, which can help decrease chargebacks and fraudulent purchases that can often impact a business’s revenue.
consider biometric payments the most secure authentication method, and two-thirds of customers already use – or are interested in using – biometric payments. 22
In the European Union, Strong Customer Authentication (SCA) is now a requirement for customers to make online payments. The SCA requirement involves customers completing two to three levels of authentication, including something they know (PIN or password), something they own (cellphone or wearable device), and something they are (fingerprint, voice pattern, etc.). While this level of authentication is not prevalent worldwide, regulatory standards by entities such as the FIDO Alliance may seek to change this in the coming years, which can have a significant impact on online payments across industries.
It’s no secret that more and more businesses are going international. With the global cross-border market expected to grow from $190.1 trillion in 2023 to $290.2 trillion in 2030,23 cross-border payments are set to become more mature and more commonplace for businesses of all types. In fact, many businesses may already use one of the many cross-border payment types to conduct business. Since cross-border payments can consist of wire transfers, international money orders, online payment platforms, and more, businesses typically use this type of payment to pay suppliers, international hires, the government, and other necessary entities or institutions.
Beyond keeping the right parties paid, cross-border payments also play a significant role in helping businesses grow. For instance, international travel and tourism rely on the ability of customers’ payment methods to be accepted across borders when booking hotels and other lodging necessities ahead of time. Shopping on international sites is another large component for cross-border payments. Square accepts ACH payments, or payments that are sent from one financial account to another, helping facilitate the seamless transfer of money that helps business owners manage their cash flows.
Central bank digital currencies (CBDC) are official forms of digital currency issued directly by a country’s central bank rather than through a financial institution. CBDCs occupy a middle ground between crypto and physical currencies. Like crypto, CBDCs only exist in digital form. However, CBDCs are a form of fiat currency, and their value is tied to the value of the issuing country's legal tender.
The United States has taken a cautious approach to considering a CBDC, though it's exploring the potential. 24 However, 69 countries around the world have CBDC programs in launch, development, or pilot phases, with another 44 nations researching CBDC options. 25
While it’s still early for CBDCs, once deployed, they have the potential to enable fast and convenient payments across a number of industries. And, depending on the lengths governments go to promote their CBDCs, these digital currencies could shift the way large chunks of consumers pay for goods and services in the future.
