The Covid-19 pandemic drastically accelerated the transformation in how we pay for goods and services in society today. Perhaps most notably, it significantly reduced the use of cash payments. Instead, there has been a sharp increase in contactless payment solutions. These contactless payments can take different forms: wearables, cards, smartphones, etc. Aside from the sanitary reasons behind this change, key drivers of this transformation include a growing quest for more convenience from consumers and businesses alike. As a result, digital payments solutions increasingly seek to make the payment process smoother on both ends.

Moreover, innovation in payment solutions is also driven by the need for financial institutions and businesses to adapt to growing trends such as cryptocurrencies, which face significant demand in certain regions. Indeed, today, a growing number of consumers wish to pay for their goods and services with cryptocurrencies such as Bitcoin. Many solutions are therefore emerging to help businesses accept new types of currencies for digital payments.

Businesses must also adapt to generational shifts. For example, Millennials and Gen Z often seek out new types of payment solutions and have different spending habits than other generations. Paying for goods and services through social media, or using Buy Now Pay Later options are two popular examples of this.

In our infographic below, we go over some of the key trends we’re seeing in the digital payments space today. These trends are ones that will continue shaping the financial sector, with the emergence of innovative fintechs and new technologies.

Recent trends

• The global digital payments market is expected to be worth $361 billion by 2030

• In Q1 2022, $2.5 billion worth of payments were made through Visa‘s crypto-backed card

• Research shows there can be a 50-200% increase in items purchased when the Buy Now Pay Later option is offered

• 40% of surveyed 18-35 year olds plan on paying with cryptocurrencies in the coming year

• 75% of the United Kingdom’s Buy Now Pay Later users are 18 to 36 years old

• 53% of surveyed consumers have already paid to purchase an item through a social media site

• Cashless payments adoption should exceed 80% by 2025

Startup news

The fintech sector certainly benefited from the pandemic. In fact, in 2021, 20% of all venture dollars on a global scale went into fintech startups. The favourable market conditions have helped the number of fintech unicorns grow 4x since beginning of 2021. Although things have been slowing down a bit in 2022, it’s clear that fintech still holds significant promise for investors. In Q2 2022, fintech payment startups raised $52 billion in VC funding.

The changes in demand and funding experienced by the fintech startup ecosystem in 2022 have shed light on a few key opportunities. For example, while Buy Now Pay Later is still a key trend, startups focusing their service to businesses rather than consumers are seeing growing success. Indeed, B2B BNPL is growing in popularity, as illustrated by recent success stories like Hokodo’s $40 million Series B. From a business standpoint, mobile-point-of-sale solutions are also in high-demand. They provide flexibility and convenience to sales staff and merchants, who are able to move more freely. Amidst all of this transformation, and especially with the surge in cryptocurrencies, cybersecurity and fraud prevention solutions will also continue to play an important role. Biometric payments are also seeing growth in adoption, with startups like Paybyface developing technology to complete payments via facial recognition.

Overall, fintech startups will need to pay close attention to the shifts happening in the market today in order to stay on top of innovation and avoid some of the struggles their peers have faced lately, such as drastic valuation drops after periods of booming growth.