From cash to crypto: the rise of digital payment methods
Money has been gradually digitized for decades, and the electronic transfer of funds is nothing new. But over the last five to ten years, internet technology and e-commerce have made digital payment methods the standard; these trends have sped up dramatically since the pandemic. Gen Z is leading the fray with near-total adoption and use of digital payments.
Digital payments – the exchange of value via an electronic means without an exchange of cash – goes beyond credit cards, allowing various methods online, connected to bank accounts or credit cards, and even including cryptocurrency.
Providing QA for payments used to mean double counting cash – now you have 20+ individual payment methods/processes that vary across countries, populations, and applications as part of your payments testing strategy. While it can be overwhelming, standards for seamless payment experiences are only becoming more critical to end-users.
History of digital payment methods
Online payments go back to the mid-1990s, with the Stanford Federal Credit Union generally recognized as the first to offer online payments. PayPal wasn’t far behind, along with contemporary competitors who were absorbed or beaten out by the now ubiquitous online banking solution.
Today, the digital payments industry is expected to reach over $15 trillion by 2027, representing a doubling forecast from 2021. The reason for this rise is clear – digital payments provide significant benefits for both consumers and companies:
- Convenience – Digital wallets and other forms of payment can draw directly from bank or credit card accounts without having to dig out a physical credit card or remember credit card data.
- Security – Digital card solutions utilizing tokenization and high-security encryption reduce the risk of fraud and identity theft, meaning they’re safer to use online than traditional credit cards. This, in turn, reduces chargebacks and investigations that cost companies money.
- Control – Cardholders and issuers can put tight, granular control on what payment methods can be used for, set limits, and track transactions, giving customers better control over their spending and sellers’ confidence in sales.
- Increased sales – Convenience for customers means better sales conversion rates for companies, meaning higher overall revenue and better margins.
Digital payment types
Digital payments include a variety of methods and technologies, all of which include transferring financial value electronically via the internet. Some of the most common include:
Except for cryptocurrency, all these methods connect directly to bank accounts and/or credit cards, using encrypted technologies to transfer traditional currency from customer to vendor through third-party payment gateways.
Gen Z leading the fray of digital payments
One of the reasons digital payments have exploded in the last decade is better technology and a rising population of digitally-native users. Gen Z is growing up in a world with rapidly advancing technology and has a natural affinity for digital tools and devices. They are globalized through e-commerce – groceries can come down the road via DoorDash, across the US via ThriveMarket, or globally through GoldBelly, YummyBazaar, and Amazon.
For them, digital payments are seen as a part of life that provides a convenient, fast, and secure way to pay. Teens today grew up amidst alternative payment methods like Venmo, Paypal, and tap-to-pay and are more comfortable with contactless payments than traditional (i.e. cash, checks).
Gen Z has high demands for software, web and mobile apps, and e-commerce sites. Frictionless digital payment experiences are no longer a bonus to Gen Z/X shoppers but a clear expectation for e-commerce sites. Payments can fail at any point along this chain due to user and system errors – and your web or mobile application needs a solution. Any bug in the workflow can immediately end the transaction – and the sale.
Are your digital payment processes not up to snuff? We can help.