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Insights and Expertise

The American digital payments revolution

By Andrew Russell Currently, credit and debit cards are the most commonly
Sound Payments used online payment methods. To accept these payments
in an ecommerce setting, you need to implement a pay-
he American digital payments revolution began ment gateway or virtual POS. A virtual POS functions as
in the mid-1990s and gradually evolved over the digital equivalent of the physical POS terminals found
time. However, it was the global pandemic of in retail stores, allowing for secure card transactions on-
T 2020 that accelerated the need for alternative line.
payment platforms due to mobility restrictions. As con- Proliferation of new options
sumers were forced to adapt and explore these new meth-
ods, they discovered that, contrary to initial hesitations, As the payments industry continues to rapidly evolve
these alternatives offered significant convenience. This globally, real-time payments are gaining momentum in
shift in perspective highlighted that the benefits of digital the United States with the introduction of the FedNow
payments were well worth the transition. platform and other technologies provided by fintech com-
panies and financial institutions. When discussing real-
A 2023 Forbes study confirmed an explosion in the use time payments, it's also important to consider cross-bor-
and integration of digital wallets. More than half of U.S. der payments—a market opportunity projected to reach
consumers now use digital wallets more frequently than $250 trillion by 2027, according to analysts and financial
traditional payment methods like cards and cash. institutions (PYMNTS). Embedded finance, also known as
integrated finance, is anticipated to grow by over 30 per-
Skyrocketing consumer use
cent globally through 2029. This approach allows for the
The number of U.S. consumers utilizing digital payment integration of financial services across various industries,
systems such as Apple Pay, Google Pay, and PayPal is pro- fostering new business models. It facilitates the provision
jected to skyrocket from 160 million in 2022 to over 260 of lending, insurance and payment services without the
million by 2030, according to recent projections. Addition- need to develop the underlying infrastructure or obtain
ally, the National Retail Federation reported that within regulatory approvals. (PricewaterhouseCoopers)
the next 18 months, 80 percent of retailers plan to accept
Apple Pay, and 65 percent intend to accept Google Pay.
Digital payments revolution by the numbers
Google Pay and Apple Pay facilitate payments via NFC Follow are key data points drawn from Andrew Russell's
technology and also support online transactions on mo- "The American digital payments revolution":
bile devices with Android or iOS operating systems. Both
systems ensure that the recipient of the payment does not • Over 50 percent of U.S. consumers now use digital
receive any personal information about the payer. Similar- wallets more frequently than traditional payment
ly, platforms like Amazon Pay and PayPal offer enhanced methods (Forbes).
security for online transactions by keeping the payer's • U.S. consumers using digital payment systems
personal data and account numbers private. (Apple Pay, Google Pay, PayPal) are projected to in-
Continuous analysis through AI crease from 160 million in 2022 to over 260 million
by 2030.
Artificial intelligence (AI) is rapidly making its way into • 80 percent of retailers plan to accept Apple Pay,
the payments market, transforming sectors such as ecom- and 65 percent plan to accept Google Pay within
merce, online ordering, hospitality and the restaurant in- the next 18 months (National Retail Federation).
dustry. AI leverages automated learning through sophisti-
cated algorithms and specialized programming, enabling • AI is transforming payments in sectors such as
continuous data analysis and interaction improvement- ecommerce, hospitality, and online ordering by
sThis technology helps to minimize or eliminate errors reducing errors, detecting fraud, and enhancing
(potentially meeting Six Sigma standards), detect fraud decision-making.
and enhance decision-making processes. • Cash usage has declined 20 percent globally over
the past five years, with electronic transaction
The European Central Bank reported a 20 percent global growth outpacing payments revenue nearly three-
decline in cash usage over the past five years, while the fold (European Central Bank).Real-time payments
growth rate of electronic transactions has nearly tripled are gaining traction in the United States with the
that of payments revenue. The landscape is diverse and cross-border payments market projected to reach
expansive, encompassing a wide range of players, both $250 trillion by 2027 (PYMNTS).
traditional and non-traditional. This includes banks, re-
tailers (such as stores, gas stations and pharmacies), fin- • Embedded finance is expected to grow by 30 per-
tech companies, related institutions, independent soft- cent globally through 2029, potentially accounting
ware vendors, processors and more. for 50 percent of a bank's revenue (McKinsey &
Co).
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