Digital payments – invest.ch

The pandemic has accelerated two trends in the world of digital payments: the shift from cash to cashless transactions and the adoption of e-commerce. These concepts certainly weren’t new, but with restrictions, lockdowns and the inability to move freely (especially across borders), these trends have become major drivers of growth and increasing adoption of digital payments.

Globally, digital payments revenue declined from $2 trillion in 2019 to $1.9 trillion in 2020. Covid is at the root as widespread uncertainty weighed on consumption levels around the world. However, a 5% decline recorded during the worst economic crisis in history is far from catastrophic.

The sector, now in recovery mode, is expected to reach a valuation of $6.6 trillion in 2021 and $10.5 trillion within four years. These forecasts are prompting companies to stabilize their production during the pandemic and react to changing customer behavior and technological advances.

Stocks to watch: Alipay, Amazon Pay, Apple Pay, Tencent, Google Pay, First Data, Paypal, Fiserv, Visa Inc. and MasterCard.

Some developments

The prospects for the future are promising. Everything lost in 2020 is expected to be recovered in 2021, with revenue projected to reach $2.6 trillion by 2025, according to McKinsey, at a compound annual growth rate (CAGR) of 7%. By extending the forecast period by five years, BCG estimates that the market should continue to grow at the same rate through 2030.

The split between retail and wholesale markets remains stable, with 75% of sales coming from the retail market and 25% from wholesale sales. The forecast is for the retail market to grow marginally by 1% through 2025, which will remain flat through the end of the forecast period.

The Asia-Pacific region will be the engine of growth. This region has consistently outperformed others in terms of growth rate, and this trend is set to continue at least through 2025. % in North America. By 2025, revenue in North America will grow from $500 billion to $600 billion.

The transition to digital payments is not free from threats and vulnerabilities, with the biggest risk to paperless payments being fraud. Attacks are increasing in number and sophistication, but traders are taking action. They take a multi-layered approach that, while not foolproof, has reduced the frequency of attacks.

Merchants continue to transform their customers’ payment experience by integrating payment services into their platforms. Previously, service providers connected merchants to the mainstream financial system so they could accept credit and debit card payments. The updated process eliminates third parties and makes the transactional element of the sale transparent.

The principle of deferred purchase, which allows consumers to spend small amounts when their personal budget is tight, has become indispensable in this pandemic. The sector continues to grow in popularity and is expected to see $680 billion in transaction volume worldwide by 2025.

Outlook 2022

Although cash payments are likely to recover slightly after falling in 2020, the trend is toward widespread adoption of paperless payments. McKinsey estimates that two-thirds of the decline in cash use will be permanent. JP Morgan is already envisioning a world where payment is made entirely in the background, with no checkout required. More technological advances are still needed, but this seems to be the path we’re on.

Payments will also be faster. Businesses want access to funds on the day of sale, and digital payments can provide that benefit. Ultimately, real-time payments could become the norm, with little difference from cash payments.
Digital payments are here, not just forever, but to transform our lives.

The certificate “Digital Payments” from Swissquote is aimed at companies that are well positioned to take advantage of current market trends due to their strong market share and business partnerships. The basket of securities includes payment providers, financial institutions and providers of electronic payment solutions.

ISIN CH0434695034
Value 043469503
Icon DIGPTQ

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