expressed opinion entrepreneur Contributors are themselves.
Fueled by the shift in consumer behavior driven by the pandemic, our adoption of contactless and digital payments has accelerated economic change in tangible ways, providing better traceability, accessibility at home and in the wider developing world and security. The proliferation of mobile devices further drives the market conditions.Most people in the world today own a smartphone – 86.41% according to politician By 2022 – This further fuels the growth of digital payments globally at a projected CAGR of approximately 15% in emerging markets by 2026.
This democratization of payments from traditional financial institutions to telecoms, merchants, fintechs, global brands and more is enabling an explosion of embedded financial models and compounding impact on customers’ financial interactions across the digital experience.
Related: Payments Wrapped: Digital Payments in 2022 and the Promise of 2023
Build the economy and drive new business
One of the positive externalities of the pandemic is that people are more willing than ever to shop online, whether it’s clothes, consumables or groceries. This willingness to interact in digital spaces is no longer limited to younger generations. Purchasing power no longer belongs to millennials and Gen Z; it transcends age. It’s not uncommon for older generations to pay online, including my 84-year-old father.
Due to the pandemic, the adoption of digital habits is purely out of necessity. Today, these habits permeate our lives due to their sheer convenience. However, the rapid growth of fintech payments does more than just make life easier in developing countries – it directly contributes to quality of life, empowerment, human security and policy enforcement as these countries transition from cash to digital payments Still in its infancy.
The acceleration from physical to digital payments will create new digital economies and interactions between sellers and consumers locally and globally.
During a recent trip to India, I witnessed firsthand part of the world’s digital transformation. The last time I visited India, two years before the pandemic hit, I expected to see little change. This time, however, I found myself standing in a small local flower shop that used to only accept cash. Today, digital payments have modernized it. Most of the stores I go to these days don’t have signs advertising “cash only” and instead show me QR codes and app-based payment options. The florist is no different — but now, it has a sign directing customers to pay through the app.
India’s economy has been transitioning through going cashless (aka shifting to digital) for several years now, and they’re not the only ones. Repeatedly, developing countries all over the world are slowly moving into digital payments, slowly transforming a gray economy with huge income gaps into a more transparent, traceable and manageable ecosystem. A symbiotic relationship is formed between private and public markets, fostering competition, economic growth, and consumer choice, while driving traceability and accountability for governments and regulators.
It also empowers new commercial commerce and expands the reach of new gig workers through the power of smartphones and digital payments, capabilities that are now embedded directly into your brand’s customer experience.
In Latin America, for example, the informal economy is one of the main sources of income for a large part of the population. According to OECD (Organization for Economic Co-operation and Development) estimates, About 70% of the gross domestic product Not in the official payment system and therefore not subject to government control in 2018. Now, according to McKinsey, only 36% of the value of POS transactions will be cash by 2023.
As a consumer, you can search for any product or service from your mobile phone – and as a gig worker, you can generate ongoing cash flow through easy access to consumers and needs. This win-win situation creates a more entrepreneurial mindset for all. It could also threaten large corporations, since it is easier and less frictional for small business owners to enter. Brands large and small see both the opportunity and the challenge to connect and create lasting direct relationships with consumers with now ubiquitous digital options.
Related: How digital payments can make SMEs more competitive in the post-pandemic world
The data behind the money
With this evolving scenario, one question comes to mind: How can companies navigate the ecosystem and incorporate payments into their businesses? The answer is data.
Bringing modern payments to emerging markets creates a world of opportunity. By developing a host of microcosms, we can bridge the gap between the kinds of services people want, such as home delivery and ride-sharing, and the digital solutions needed to facilitate these instant transactions through new customer experiences and payment processes.
In the process, companies collect vast amounts of data about consumers that would be impossible to track or make sense of in a largely cash-based society. By moving to digital payments, companies gain the ability to track consumers from one merchant to another, better understand transaction and behavioral patterns, and move toward hyper-personalization of offers and products. This helps them understand what they’re searching for (ie, what they ate at the last restaurant they visited and what products they bought – down to SKU and size). This data can transform marketing strategies and reimagine customer and supplier journeys to drive new offers and loyalty programs by creating direct relationships between brands and consumers through embedded payment processes.
Of course, in addition to this data, there is also an urgent need for payment processors and card issuers to manage and use it responsibly. Currently, the payments industry is realizing the potential of new microcosms that were not possible before, while striking the right balance between consumer consent, reporting and data protection. It is only a matter of time before the power of data will increase the understanding of consumers and our respective needs.
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Empowering People, Promoting Business Growth
When used correctly, modern payment solutions do more than simply provide convenience to users. Instead, they also increase safety, security, and speed. Additionally, the data behind payments can change the way we discover and engage with customers. For businesses (small and large), it is an opportunity to create targeted campaigns for consumers, offer services and products globally with ease, create a consumer-friendly user environment on their platform and ultimately increase revenue and customer base opportunities.
How can this be done? The key to ensuring payments continue to actively disrupt our ecosystem requires recognizing a fundamental truth:
The power is in the hands of consumers, who have more choices than ever before. Today’s best financial services companies, e-commerce brands, and tech startups are leading the way as they focus on being better partners to consumers, making them better suppliers.
The explosion of optionality and digital touchpoints between consumers and brands continues to underscore the importance of customer experience, digital transformation and data enablement for brands and sellers. A brand’s robust engagement in the customer journey will differentiate them among consumers looking for a consistent and frictionless experience from start to finish.
By determining what is best for those on the other side of the equation, the financial services industry has the potential to change the world as we know it—and that change is happening before us today.
