Payments in the 2020s – what does the future look like?
We’re witnessing an exciting technological transformation that will shape the future of the payments industry. Advancements in technology are enabling consumers and businesses to pay and be paid in new ways that are more convenient for them, with new solutions making it easier than ever to manage and move money.
As well as benefitting people and businesses alike, these new technologies could help drive economic growth. This is crucial as the UK seeks to recover from the economic impact of the Covid-19 pandemic.
So, what are the technologies to look out for?
Consumers and businesses no longer accept that paying or getting paid could take days. In a world where people are used to instant experiences, they expect to be able to send and receive money faster as well.
That’s why growth of real-time, peer-to-peer (P2P) payments is surging. Consumers love that they can send money to family and friends in an easy, quick and secure way. Importantly, in an increasingly connected world, they can also send money across borders. In December alone Visa saw an 500% global increase year-on-year in real-time cross-border transfers.1
Visa Direct is our solution for enabling real-time2 P2P payments – but it can also be used by businesses to send money almost instantly to customers, employees and other businesses. This makes a big difference – allowing the person or company receiving money to get it almost instantly, but also providing cost savings to the sending business compared with traditional methods.
In the coming years, we expect real-time payments will become the new norm in many cases – enabling smoother payments whether they are peer-to-peer, business-to-business or cross-border.
The value of Bitcoin has soared in recent months – hitting a new all-time high at the beginning of February 2021.3 New uses for digital currencies are being found all the time, and increasingly we’re seeing global businesses and investors taking these currencies seriously.
Our view is that digital currencies can be divided into two groups. First, there are crypto currencies that represent new assets – for example, Bitcoin. Second, there are digital currencies or Stablecoins that are directly backed by existing Fiat currencies. Both groups offer intriguing potential uses for consumers and businesses.
Crypto currencies in the first group are viewed as ‘Digital Gold’ – assets that maintain value over the long-term in a similar way to Gold. This is reflected by the fact that some major companies have invested cash reserves in Bitcoin. As of today, these currencies are not used as a form of payment in a significant way.
On the other hand, the second group of Stablecoins and Central Bank digital currencies are an emerging payments innovation that could have the potential to be used for global commerce much like any other Fiat currency. As these currencies become a real means of exchange, there really should be no reason why we couldn’t add it the Visa network.
At Visa, we are uniquely positioned to help make these currencies more secure, useful and applicable for payments. We are already doing this, with many of the leading digital currency platforms and wallets having already chosen to partner with Visa.
Artificial Intelligence (AI) is already playing a major role in making everyday payments easy, quick and secure – and that role is going to grow.
It’s been the case for some time that AI technology picks up on suspicious payments. For example, if you pay for your shopping with your Visa card in Birmingham and then 10 minutes later the same card is used to buy a takeaway in Belfast, AI technology will flag that transaction to banks as suspicious. The more data it has, the more AI learns – so the technology is always getting smarter.
But AI doesn’t just help keep payments secure – it can do much more. Visa is already using the technology to develop products that help your bank show you the correct balance on your account and that support network resilience so payments go through even when banks experience service disruptions.
As AI becomes more powerful, we can expect more use cases that make payments more convenient and secure for financial institutions, businesses and consumers.
Moving towards our future.
The opportunities to transform the payments landscape over the coming decade are huge. Real-time payments, digital currencies and AI and are just three of the major trends that will shape the future of moving and managing our money.
Our team at Visa is working relentlessly to innovate and accelerate the roll-out and adaption of new technologies, but we’re not doing it alone. We’re lucky to be working in partnership with some of the world’s most exciting fintechs as well as forward-thinking clients at the country’s largest banks.
It is through this collaborative approach that we are confident we’ll foster the breakthroughs which will change the payments industry forever.
1 Al Kelly, Visa Q1 Earnings Call
2 Actual fund availability varies by financial institution and region.
3 BBC News, 2021 https://www.bbc.co.uk/news/business-55939972
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