How Digital Payments Have Changed the Payments Industry

The Payments industry is constantly changing, and it has been for some time. Today’s digital landscape has completely transformed the traditional banking system and beyond, as we now have a host of different services that support digital payments enabling seamless transactions across platforms. The payments ecosystem has seen many changes in the last few years and this trend is definitely not showing any sign of slowing down anytime soon. From peer-to-peer payment providers to e-wallets, mobile wallets and even blockchain-based payment gateways; the world of digital payments has become more than just an innovative way to pay for goods or services. In this article, Canadian FinTech specialist Ferhan Patel, explores how digital payments have changed the entire Payments industry!

 

What is a digital payment?

The word “payment” is used in the sense of the transfer of goods or services between parties. This may be referred to as a “conventional payment” or a “payment method”. A digital payment is when any kind of exchange of data is done electronically, including electronic transfers of money. Digital payments include online payments, electronic bill payments, online auctions, online gift-giving, and online donations.

 

Peer-to-peer Payments

Peer-to-peer (P2P) payments are online transfers of money between individuals, households, or businesses. The most common use of P2P payments is for transferring money from one person’s bank account to another person’s bank account, for example, when one person wants to pay the other person for a good or service. However, P2P payments can also be used in other ways, explains Ferhan Patel. For example, P2P transactions are also used for sharing expenses, paying rent, paying for occasional services, shopping from private sellers on online marketplaces, or simply sending money to family and friends.

 

The dawn of the mobile wallet

In the early 2000s, we saw the rise of mobile payments. The mobile wallet application enabled users to store and transfer money using their mobile phone. At that time, only a few mobile payment platforms existed, and they were typically used for payments between individuals. The mobile wallet transformed into an ecosystem that facilitated a wide range of services, including bill payments, money transfers, peer-to-peer money lending, and a host of other services. Over the last decade, we have seen a huge increase in the usage of mobile wallets. This surge in the popularity of mobile wallets led to a boom in the mobile payments industry.

Token-based or cryptocurrency payments

In the last few years, we have seen a significant rise in the popularity of token-based payments. The concept of token-based payments is based on the idea that any kind of asset can be used as payments. For example, an organization may create its own branded tokens, and then use them for payments. Many investors are also looking to token-based transactions as an investment opportunity, and this trend is expected to continue. Once a token becomes more accepted as a means of payment, it can provide a host of benefits to the businesses and individuals that use it. For example, Ferhan Patel adds, token-based payments can help businesses reduce their operational costs as they don’t have to pay fees for every transaction. Token-based payments also help businesses monetize their assets, such as air miles, bus passes, and gym memberships.

 

Blockchain and its applications in payments

In the early 2000s, almost no one was talking about the potential of blockchain technology. However, in the last few years, the potential of blockchain technology in the financial sector has become more apparent. The development of blockchain technology has enabled the creation of many different applications in the financial sector. One of the most popular blockchain applications today is cryptocurrency trading. Cryptocurrency trading is an application in which people transfer cryptocurrencies from one account to another. Traditionally, this kind of trading was only possible between individuals, but with the development of blockchain technology, trading between different types of financial institutions has become possible as well. From trading cryptocurrencies to simple peer-to-peer transactions, blockchain technology is making its mark in the financial sector.

 

Conclusion

The digital payments ecosystem has changed dramatically over the last few years. From peer-to-peer payments to token-based payments and blockchain-based transactions, the world of digital payments has become more than just an innovative way to pay for goods or services. What’s more, it is expected to become even more transformative in the coming years. With the rapid uptake of mobile payments, an increased focus on digital payments as a method of payment, and the emergence of new technologies, the payments industry is only going to grow in importance.