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Market size

The global digital payments market is expected to reach US$19.9 trillion by 2026, growing at a compound annual growth rate (CAGR) of +24.4% from 2022.

Trends & Outlook

Growth in instant payments. By 2027, cash-heavy developing economies are expected to make further significant shifts toward instant payments, bringing these transactions’ share to roughly half of overall payment transactions – nearly two-and-a-half to three times greater than in 2022.

Digital wallet to grow fastest. A digital wallet operates on mobile devices allowing users to pay for purchases directly from their devices. There were an estimated 2.8 billion digital wallet users worldwide in 2022, with nearly half in Asia-Pacific. In 2022, mobile wallets accounted for 49% of global e-commerce payment transactions, potentially rising to 54% in 2026. Tech companies, including Apple and Google, have taken the lead in developing digital wallets, challenging banks’ traditional turf and threatening their customer relationships. McKinsey found that 31% of consumers said they expected to rely on a single digital wallet such as those created by tech giants Apple, Google, and Samsung, up from 21% in 2021.

Central Bank Digital Currency (CBDC). Banks and governments have started shifting their attention towards using digital assets in their operations and economies. CBDC is a digital form of fiat (money that is issued by central banks). It is designed to be a digital representation of the country’s physical currency. According to the Bank for International Settlements, some two dozen central banks across emerging and advanced economies are expected to have digital currencies in circulation by the end of the decade.

Super apps. The foray of digital payments firms into financial and lifestyle services coincides with the rise of so-called ‘super apps’. Super apps are multifunctional mobile programmes that offer a range of services, including social networking, e-commerce, payment options, travel, food delivery, and more. Big tech companies like Meta, which integrates payments into WhatsApp, Amazon with Amazon Pay, as well as Apple and Google with integrated payments in their respective mobile operating systems, are competing to become the trusted payment provider for consumers.

Challenges

Low profits. Margins for digital payments providers are already wafer thin and are likely to be eroded further by competitive intensity and declining fees. In many cases, payments are more a means to cross-sell other products than a profit centre in their own right. To create profitable income streams, digital payment companies are entering other payment arenas, such as bill payment, merchant services, and remittances. They are also offering a more comprehensive range of financial services.

Financial crime. The rise of digital payments has increased the potential for financial crime risks – namely fraud, money laundering, terrorist financing, and sanctions risks. As such, fintech companies are constantly focused on balancing between the need to maintain user satisfaction and the management of increased financial crime risks to meet the demands of evolving regulations.

Regulatory protections. In June 2023, the European Commission published a set of new legislative proposals, notably for a Third Payment Services Directive (PSD3) and a Payment Services Regulation (PSR). It foresees changes to the foundational framework of the European payments market and is likely to have a material impact on the players subject to it, both from a legal and operational perspective. In November 2023, the US Consumer Financial Protection Bureau’s (CFPB) proposed to regulate tech giants’ digital payments and smartphone wallet services, saying they rival traditional payment methods in scale and scope but lack consumer safeguards.

Content for the full free report:

Market definition

Market size

Trends

  • Growth in instant payments
  • Digital wallets will lead
  • BNPL (B2C and B2B)
  • Central Bank Digital Currency
  • The rise of ‘super apps’
  • Major mobile payment apps

Challenges

  • Low profitability
  • Financial crime
  • Cybersecurity
  • Failure of supporting networks
  • Regulatory protection: EU and US

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