Payment Transactions in 2021: Trends and Perspectives for Digital Payments

Between the survey years of 2008 and 2017, it is clear to see that use of debit and credit cards was still on the rise, while payment in cash lost market shares - although it still remained the most popular payment method overall. The German Bundesbank has yet to publish a survey for 2020. However, it is fair to say without any real doubt that the aforementioned development is moving forwards at an even greater pace this year. After all, the coronavirus pandemic is making cashless and also contactless payment transactions virtually indispensable. As such, even traditional brick and mortar retailers now generally prefer customers to pay by debit or credit card rather than cash. Unlike back in 2008, there are now various mobile payment solutions available. Another trend can be observed here, as the payment options used at brick and mortar shops and in eCommerce are increasingly converging. While a strict separation could previously be observed (cash/debit card for local, credit card/e-payment solutions/mobile payment for digital), these borders are now becoming blurred. From a behavioural psychology perspective, this is not surprising. Although previously the exclusive domain of eCommerce and digital shopping, the advantages of contactless payments are now also becoming apparent to consumers that generally do most of their shopping at brick and mortar retailers. This is speeding up the process of familiarisation and will help contactless payment methods establish themselves as the new standard in the near to medium future.A survey from BearingPoint, which includes a graphic², also shows how cash payments have been in constant decline for some time. In fact, more and more German citizens can now even imagine moving away from cash altogether.

Perhaps the most important trend, also for next year, is mobile payments. As can be seen in the detailed analysis here³, a transaction volume of €8,309 million is anticipated for mobile POS payments in 2020. This figure is then set to rise even further to around €45,500 million in 2024. Paying by smartphone (and to a lesser extent by tablet) is becoming appreciably more important. While only around 400,000 consumers used mobile devices to pay at the POS in 2017, this figure is set to increase to around 19.5 million consumers by 2024. Fast, mobile payment transactions therefore remain at the forefront of payment trends, both at brick and mortar retailers and in eCommerce.This is also underlined by the fact that many established providers are now offering mobile payment solutions which can also be linked to cards such as credit cards. From the perspective of consumers, however, making a "mobile" payment does not always involve charging an existing account or having to set up a new one. Instead, the current trend clearly highlights the suitability of mobile devices as a flexible payment solution which can be synchronised with already well-established payment methods. From the consumer standpoint, this makes it far easier to get a foot in the door. The forecast rise in use of mobile payments has also been expedited by the COVID-19 effect, which was already taken into account in the aforementioned statistical survey.

Companies that have already enjoyed particular success in this regard include full-scope payment platforms such as PayPal, which has been the largest e-payment platform in Germany from the outset. In the Asian region, WeChat Pay is the clear favourite. However, this uses classic payment methods, such as bank transfers. Consumers are now starting to put a lot of trust into these alternative payment methods, which is not unfounded. After all, companies like PayPal have already been established and operating in the market for a long time. Their fee structure, which has clearly been aligned to benefit consumers, also makes them popular for both small and large payments. The exact same benefit that mobile payment solutions deliver, namely providing an interface to classic payment methods such as credit card and current account, is also developing into a plus point for these payment platforms.The social change that is taking place is facilitating both the first trend and also this trend. Having grown up with the Internet and smartphones, "Generation Z" is now rapidly approaching working age. Not only do these consumers of the future appreciate technically advanced, contactless and fast payment solutions, they rarely even consider or take note of classic SEPA transfers.

Amazon got the ball rolling back in 2014 with Alexa. The primary aim of smart speakers, which are now for example also being offered by Google and Apple, is to make things more convenient in the home. Consumers can then use voice-controlled virtual assistants to search for information, play music or even do their shopping. According to a survey⁴ from 2018, some 28% of all voice-controlled virtual assistant users were already willing to allow these devices to make payments for them. Interfaces between payment types and voice-controlled virtual assistants are likely to become the standard in future, not least because these intelligent assistants are already far more reliable at performing various tasks than was the case just a few years ago.

It was only around three years ago that cryptocurrencies such as Ethereum, Bitcoin or Chainlink seemed to race from one all-time high to the next. Then came the crash. However, not only have they now recovered, many cryptocurrencies are now being used in an even greater scope than the original purpose of Bitcoin, which was as a means of payment. Indeed, many merchants have long since been allowing their customers to pay via several of the cryptocurrencies. The actual benefits of Bitcoin and the like have remained intact throughout all of this. Transactions can be traced transparently via the blockchain, meaning that merchants know immediately when a payment has been irrevocably sent.In addition, big players such as VISA are now getting involved in this business. A lot has also been going on in the background in the meantime. Blockchain, the technology behind the cryptocurrencies, is already being used by major companies to optimise various business processes. Handling of cryptocurrencies is also being made far easier thanks to use of secure e-Wallets, QR codes and vanity URLs. In the near future, cryptocurrencies are therefore likely to continue playing a niche role for tech-savvy consumers and could potentially even increase their overall market share - thereby also benefiting from the trend of contactless, fast payment transactions.

Regardless of how well which trend catches on, there is one premise that will not only remain in future, but continue to dominate consumer behaviour: freedom of choice. With Unzer, merchants gain access to a flexible, agile and versatile payment solution without having to worry about the individual channels and payment methods. At the same time, they benefit from further value-added services such as risk management. Offering a wide range of payment types communicates a consumer-oriented alignment, both on the Internet and at the POS in brick and mortar shops, while serving to position brands as digital innovators. It also helps optimise conversion rates and reduce the number of abandoned shopping baskets. The trend towards offering consumers greater freedom of choice should not be underestimated - particularly during the years of transition from classic to digital payment types that we are currently experiencing.

For more information on payment trends for 2021, see our new white paper.