The Rise of Paytech and Its Impact on E-Commerce
- All, Insights
The evolution of the traditional payments ecosystem has been quick and impactful. During the fintech revolution, new players have grasped all the opportunities. After making a big splash in personal finance management, they’ve expanded to payments.
Today, fintech companies offer a variety of payments + technology combinations. Businesses, in turn, use them to attract more customers and maximize profits.
What is paytech?
Paytech is payment using technology. The technology, in this case, can be software, hardware, or both.
The simplest example of pay tech is a purchase in a store through a POS terminal. It doesn’t matter whether the store is online or offline. In both cases, technology is involved. When you pay at a brick-and-mortar store, the technologies in use can be chip cards, near field communication (NFS), or QR codes (the list is incomplete). When you pay in an online store, technologies in use can be a payment gateway, mobile banking, or digital wallet (the list is incomplete). In a nutshell, any payment other than cash is considered a paytech.
Thanks to the growth of innovations in payment technologies, today, we have various fintech products revolutionizing the payments industry.
Six innovations driving payment technology success
The paytech market is developing rapidly. In 2023, the market size of digital payment solutions was estimated at $96.07 bn and is expected to have a 21,1% CAGR by 2030. The global number of fintech payment companies exceeds 30,000, and the growth rate of such companies has not slowed down for the last six years.
The rapid development of payment technologies wouldn’t be possible without great demand for paytech solutions. Both businesses and customers benefit from broader payment functionality, superior user experience, and faster transactions. Companies that want to take their business to the next level through technology in finance should easily navigate the digital payments landscape. Here are the most popular payment technology solutions that can drive your business success:
1. Instant payments
Instant payments are electronic payments that are processed in real time 24 hours a day, 365 days a year. These transfers make funds instantly available for use by the recipient.
The main goal of real time payments is to enable users to make fast, low-cost transactions from one account to another. G2B, C2B, and various types of B2B real time payments contribute to the development of payment infrastructure and increase non-cash operations.
Thanks to disruptive payment technologies, instant payment processing is gaining momentum in countries worldwide. But most importantly, they will continue growing. According to the ACI’s Prime Time for Real-Time Global Payments Report, real-time payments will reach 28% of all electronic payments in 2027.
The modern technologies that stand behind and drive the future of finance are AI, tokenization, and blockchain payments.
2. Cross-border payments
Cross-border payments are payments between parties located in different countries. These transactions are similar to typical payment transactions with the only difference being that they cross the border.
The main problems of international payments have always been low speed and high fees. The situation where money is credited to the payee’s account within a few days or even longer was normal for payments from country to country.
Thanks to new payment methods and technologies, the speed of international payments has increased significantly. In addition, banks’ focus on the decentralized ledger network and blockchain payment processing has greatly reduced the cost of cross-border payments and improved the payment infrastructure.
3. Digital wallets
Digital wallets are online payment tools that allow users to make fast digital transactions around the world. Customers deposit money into their wallets directly or connect their bank accounts to them. Assets can be held in one or more currencies. A customer can transfer their money to a bank card or receive it in cash at pick-up points at any time.
For businesses, digital wallets open up new opportunities to attract and retain customers, thanks to:
- Convenient payment options
- Access to data about customer purchasing behavior
- Access to global markets and cross-border transactions
- Enhanced security features and reduced risk of fraud
- Ability to provide personalized offers directly to users
Payment tech revolutionizes digital wallets, enabling users to use them on multiple platforms and devices. It also turns them into super apps that act as one-stop points for different payments, including e-commerce, food delivery, transportation, and more.
4. Buy now, pay later
Buy now, pay later (BNPL) is a type of e-commerce payment that allows customers to buy goods immediately but pay for them later. The advantage of BNPL is not only that the payment is deferred over time, but also that it is divided into installments. In major cases, if a customer pays on time, they do not incur a fee for using the deferment.
Initially, buy now, pay later was intended to make the purchase of luxury goods more affordable. However, over time, the adoption of this payment method has become widespread.
In 2023, BNPL payments accounted for 5% of global e-commerce expenses and exceeded $316 billion. Customers opt for this option to get goods they cannot pay for immediately, and businesses benefit from bigger sales and increased customer loyalty.
BNPL is often a part of the functionality of a specific paytech product. For example, payment providers like Stripe and PayPal offer BNPL, among other online payment methods. There are also dedicated BNPL services that position themselves as payment technology for more affordable shopping. Examples of such services are Klarna and Zip Co.
5. Digital currencies
Paytech is revolutionizing not only the way of making payments but also the means of making payments.
Given this, digital currencies are one of the most prominent payment industry trends. Today, they are created by independent fintech companies and central banking institutions. The main difference between a central bank digital currency (CBDC) and an independent cryptocurrency is that the central bank fixes the value of the first, while the value of the second is formed based on supply and demand for tokens.
Blockchain is the key technology behind digital currencies. It enables the creation of an immutable record of all transactions. This means that transactions are entered into a decentralized ledger, which makes it impossible to change or falsify data.
Today, there are about 10,000 cryptocurrencies, and more than 100 countries are developing their own CBDCs.
6. Embedded finance
Embedded finance is a financial technology that is part of the functionality of a non-financial digital service. An example of embedded finance is a bank card issued by a retailer or insurance provided by an e-commerce marketplace.
Embedded finance significantly improves user experience because the customer can order all the necessary services in one place. For businesses, embedded finance acts as an additional source of income. By offering the convenience of receiving basic and additional services in one place, companies increase sales and strengthen brand trust.
In addition, embedded finance services are usually provided on more favorable terms for companies. For example, embedded online payment processing for small businesses will be much more profitable than traditional merchant services, as it eliminates the need for third-party processors and reduces transaction fees.
Paytech and e-commerce: a match made in heaven
During the COVID-19 pandemic, people unable to leave their homes began spending more time online, including e-commerce shops and social networks. Such circumstances have given rise to other shopping trends that still prevail and social commerce is one of them.
Social commerce involves selling goods or services through social media platforms. In some cases, users can make purchases directly from the social platform. In other cases, they are redirected from the social app to the company’s website or online store. Brands that quickly responded to the change experienced exponential growth in sales.
To this day, social commerce remains a powerful sales channel. In tandem with payment technologies, it has the potential to change the future of e-commerce.
The most popular use cases of paytech in social commerce are:
- Adding ‘Buy now’ buttons to shopping posts
- Enabling in-app purchases of digital goods or subscriptions
- Splitting bills using paytech apps with social context
- Promoting posts with direct purchase links
- Activating borderless markets by using cryptocurrencies and blockchain for payments
How DCM can bring your business to the next level
Modern users understand well what digital payment is and what benefits it brings. So, given the diversity of offerings on the market, people tend to choose those sellers who invest in frictionless purchase experience, ensuring immediate availability and nearly zero fees.
If you want to outpace your competitors, you should make the most of modern payment technology, and add it to your business. But most importantly, it’s easier than you think. All you need to do is choose a reliable paytech partner who understands the current state of payment technologies and directly influences the future of payments.
At DCM, we leverage proven paytech, including artificial intelligence, tokenization, and blockchain for payments, to create seamless experiences for sellers and buyers alike. We offer innovative, interoperable payment software to make transactions instant and cost-efficient, regardless of the amount. If you feel that your business needs a paytech push, you are in the right place. Drop us a line and we will conduct a free consultation demonstrating how we help you meet goals and budget limits.
info@dcm.systems
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