Published On: Mon, Dec 17th, 2018

The Evolution of Digital Payments and Its Impact on the World at Large

Digital payment technology is progressing at a rapid pace, and the Entrepreneur predicts that within the next 10 years, the world will become mostly cash-free. And that change will affect every person on the planet and potentially redefine the banking system altogether. Today there are services that allow for instant payments, but they progress extremely fast. And as their versatility grows, so do the benefits of using them. Yet, despite all the advantages of digital payment services, they remain the minority for now.

Move over Google wallet. the slim wallets are catching on!
photo/ screenshot from YouTube

Digital Payment Services: From Digital Cash to Digital Wallets

The story of money digitalization officially started around 1983 when David Chaum created the first digital cash variation. It didn’t gain traction then, but in the late 1990s the era of Internet payments truly began. That, in turn, gave push to the rise of eCommerce, which has reached over $1.915 trillion in sales and should go over $4 trillion by 2020. And it’s this particular growth that now pushes the digital payments services industry further.

Starting with PayPal created in 1998 these services have reached a new level. The advent of mobile technologies was the second greatest step forward. All of it resulted in the advanced apps available today.

Various digital payment solutions available now offer an easy way to save time and therefore money. Digital wallets allow one to pay for nearly any product or service even if the person forgets or loses their actual wallet. An express bill service allows making regular payments, like utility bills or loan payments, within a few moments. In fact, the user can automate those with the app and thus reduce the risk of running late with mandatory payments.

There are also services, like the Starbucks app that allow for closed loop payments. Meaning one can pay for products in-app and thus only drop by to pick up their coffee. And although it’s less popular now, direct carrier billing remains an easy method of mobile payment.

However, the people of today seek more benefits than an easy method of paying that doesn’t require cash. That’s why these digital solutions progress further. They have already found their ways to connected devices. This particular development is tied to IoT and rise of smart technologies. These solutions are not yet well-developed, but even today one can make some payments through Alexa or order and pay for coffee using smart tech in their car.

Some digital payment apps already work with smartwatches and bands. Therefore, one only has to swipe their wrist over a payment terminal to perform a transaction.

And all those payments happen near instantaneously. In fact, big banking institutions, like Bank of America Corp., US Bancorp, JPMorgan Chase & Co., and Wells Fargo & Co. recently created clearXchange, which allows for instant transfers between different bank accounts. This is a life-changing event for many businesses as it enables them to save a lot of time, which can otherwise be lost on transfer processing. The fact that this venture is running successfully is a sign that more global solutions of this kind are sure to follow.

Digital Payment Services Evolve, But Is This Enough?

The popularity of digital payment services is definitely growing, which isn’t a surprise considering their versatility. And that’s not even mentioning that many digital wallets and other solutions offer additional benefits, like accumulation of points that can be used for discounts and cashbacks.

However, despite the obvious benefits offered by these solutions, only about 13% of US adults even have a digital wallet app. And over 70% among those use it only rarely. Considering the overall popularity of mobile solutions, these numbers are abysmal. If some kind of miraculous huge leap doesn’t occur within the next year, those predictions of the world going all-digital in payments aren’t going to come true.

Author: Jane Koval

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