The use of digital payment methods is on the rise as consumers look for easier and more convenient ways to spend money.
Capgemini’s 2021 World Payment Report revealed that by 2025, 25 per cent of the world’s cashless transactions will be made up of instant payments and e-money, an increase of about 15 per cent over the previous year.
The report also said methods such as buy now, pay later, and cryptocurrency will help spur the growth of digital payments.
According to Pankaj Kakkar, head of the financial services division of Capgemini Canada, the demand for and acceptance of digital transactions that is currently taking place is a product of the pandemic.
The demand for digital payments
Companies are capitalizing on this demand.
For example, Clik2pay, a Toronto-based digital banking payment startup, enables payment processing services for businesses that provide convenient, secure and reliable payments directly from customers’ bank accounts. Recently, the company built an experience layer onto Interac’s e-Transfer service so that it can be used by e-commerce retailers and billers to collect payments. The company has also implemented a QR Code Payment feature.
These new developments lower costs compared to expensive credit cards and give Canadians without credit cards more access to make purchases. According to Kakkar, digital payments are a great way for Canadians without a bank account to manage their money.
“There’s a small percentage of our population that lives in areas where they have no access to banks or the banks are very far. This is not convenient,” he said.
Companies such as Clik2pay or One Feather, a digital banking service for Indigenous peoples, are solutions to this problem.
Although digital payments seem like a seamless way to make purchases, there are still risks that accompany the process. For example, digital wallets are becoming increasingly popular, but adding credit cards and personal payment information to online portals like Apple Wallet can pose security risks.
The Capgemini report reveals that fraud and cybersecurity threats are high. Out of all fraudulent activities, the share of account takeover fraud rose from 34 per cent in 2019 to 54 per cent in 2020.
But while Kakkar said that security issues are a genuine concern when it comes to digital payments, companies are creating security measures to avoid risk. Processes to identify who is making a purchase, what they are purchasing, and how the purchase is being made are all taken into consideration, said Kakkar.
Better for the environment
Still, when it comes to digital payments, the pros may outweigh the cons. Besides the more obvious benefits of digital payments, such as faster payments and convenience, cashless payments are also much more sustainable.
“[Prior to non-cash methods] When you spend money, you either had a cheque or cash or some kind of paper,” Kakkar said. Additionally, a 2020 blog post by Pomleo Pay states that coins, too, have a major impact on the environment. Mining of the metal in them and transport of coins have led to the emission of over 48,000 tonnes of carbon dioxide. It also shows that the plastic money used in Canada and the U.K. is just as bad, if not worse, for the environment than paper.
According to a 2019 article by Mobile Transaction, the worst part of cashless transactions is the receipt. Receipts are often not recyclable and are coated with a toxic chemical called bisphenol A (BPA).
“It is estimated that globally, 300 billion paper receipts are produced annually, consuming 25 million trees, 18 billion litres of water and 22 million barrels of oil,” the article said. Normalizing digital payment methods is one step in the right direction when it comes to making purchases more eco-friendly.
Still, digital payments are being implemented globally. The Boston Consulting Group report, Global Payments 2021: All in for Growth, said that payment revenues in Europe will increase by an average of 5.3 per cent annually from 2020 to 2025, due to the increased use of cashless transactions and online shopping. European countries are joining forces to form the European Payments Initiative, which aims to develop an independent, single European payments scheme that supports different types of digital payments.
Given the benefits, the demand for non-cash payment methods continues to grow; it is more convenient for consumers, accelerates the payment process and helps combat climate change.