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  • Writer's pictureJaime González Gasque

These Trends Will Shape Consumer Payments In 2024

Austin Mac Nab is the CEO and founder of VizyPay, a payment processing FinTech with transparent, money-saving services for small businesses.

Technology and evolving consumer preferences are rapidly changing the payments space. Consumer demand for convenience, efficiency, choice and security are several of the factors that continue to significantly impact the way people pay for things. As a result, some of the trends I expect to shape the consumer payments space in 2024 include:

Continuing Surge In Digital Payments

In 2024, the growth of digital payments that make transactions frictionless will likely continue. In the U.S., consumer use of tap-to-pay options has increased in recent years, approaching an estimated $300 billion across Apple Pay, Samsung Pay and Google Pay. Juniper Research forecasts that by 2024, unique contactless mobile payment users will hit 1 billion worldwide and digital wallet spending will surpass $10 trillion in 2025, an increase of $4.5 trillion in five years.

Since the pandemic spurred adoption of digital payments, consumer preference for such options has continued to increase. A 2022 McKinsey survey found that 62% of respondents reported using at least two forms of digital payments—a significant increase from 51% in 2021. According to this survey, within two years over two-thirds of Americans expected to have a digital wallet and many were likely to have more than one.

Declining Cash Payments

The Federal Reserve’s latest Diary of Consumer Payment Choice revealed that cash was used for 18% of all payments in 2022, a slight dip from 2020 and 2021.

McKinsey’s 2023 Global Payments Report indicated a nearly 4 percentage point decline in cash usage last year worldwide. The slow shift away from cash usage is expected to continue in 2024, as consumers opt for more efficient and convenient digital payment alternatives.

Increasing Use Of Biometric Payments

Biometric payment cards, which use authentication methods such as fingerprints, facial patterns and retinal scanning, are increasing in popularity. Last year, the biometric payment market was valued at $7.4 billion globally and is forecast to surpass $19 billion by 2029, according to Maximize Market Research.

As adoption of digital payments continues to increase, enhancing the security of these payments is critical for protecting consumers’ financial information. Entering 2024, I predict more payment solutions will integrate biometric authentication features into their systems to protect against payment fraud.

Growing Momentum Of Open Banking

Open banking is a system that allows customers to share their financial data such as account balances, transaction history and payment details with authorized third-party providers. The application programming interfaces that underpin open banking allow the secure access and exchange of customers’ financial data. This not only provides consumers with greater control over their financial data but gives them the ability to share data with fintechs and other financial services companies to gain access to tailored financial solutions.

With this promise of innovative and personalized financial products, services and solutions, open banking is gaining momentum. Juniper Research predicts the value of global open banking payment transactions will increase from $57 billion this year to $330 billion by 2027. Open banking use cases such as personalized loan offerings, bill payment, investment platforms and budgeting apps are driving this growth.

Rising Cybersecurity Imperative

Cybercrime is rising across sectors as digital transformation expands the attack surface in enterprises. In the payments space, near-field communication technology has introduced new cyber risk in digital transactions. Cyber criminals actively look for vulnerabilities in digital payment technology intent on stealing credit card details and other sensitive customer information. Consider that a whopping 71% of surveyed businesses reported experiencing payments fraud in 2021.

In an environment of rising cybercrime, securing digital payments is an imperative for companies in 2024 and beyond to protect customer data and to maintain customer trust and loyalty. Payment processing solutions with robust security features including advanced encryption technologies, tokenization and machine learning algorithms designed to detect unusual credit card transactions can help prevent data leakage and fraud.

Evolving Expectations For Personalized Experiences

Over the past two decades, companies such as Amazon and Netflix raised the bar on personalizing the consumer experience. Today, consumers expect companies to deliver a high level of personalization in interactions with them. In fact, McKinsey research found that 76% of consumers get frustrated when companies don’t personalize interactions.

Payment processing solutions that provide robust data and analytics are helping merchants understand consumer behavior, allowing them to provide the personalized offers, recommendations and payment options that consumers have come to expect. This data-driven approach can enhance the customer journey and, in turn, provide merchants with tangible benefits. According to McKinsey, personalized marketing can lower customer acquisition costs up to 50%, boost revenues and increase the ROI of marketing efforts.

These are some of the major trends I see shaping the payments space in 2024. Merchants that stay up to date on these trends are well-positioned to provide the customer-centric experiences that build loyalty and attract new business.

by Forbes Finance

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