Last update: 20/01/2023
It’s probable you have noticed the increase in popularity of digital payment methods. The digitalisation of the financial sector is unstoppable and electronic payments are expected to keep on growing – some even argue we are headed towards a cashless society. But, to what does it owe its success?
Digital payments are payment methods that are completed online, through a digital medium or the Internet. Some of the most common ones are debit or credit cards, which are available not only in a physical format, but also in a virtual version that you can configure through the online banking app you use to manage your finances or in a digital wallet.
Other examples are mobile payments via services such as Bizum, Todo Pago and CoDi, or payments completed via a QR code. The latter can be accessed via your online banking app. Where businesses have this option, you can scan the code and choose how you want to pay.
It has become so popular that it's common to hear people talking about a cashless society. The rise of digital payment platforms, which are closely linked to e-commerce and new consumer habits, mean it could be possible that we're headed to a cashless society. This trend is leading many to believe that digital payments could replace cash.
The preference for digital payments won't stop increasing, according to forecasts from Statista. In 2017 there were 2,454 billion users globally and in 2022 this reached 4,160 billion users. It is estimated that by 2027 they will be used by over 5,480 billion people, which will allow for increased financial inclusion.
Such growth is partly due to the benefits that digital payments can offer. Security is highlighted as the first one. Digital payments reduce the risk of theft and counterfeit money. These are two significant problems linked to cash, which is reduced by its digital counterpart. Online, financial transactions such as payments can be easily identified. This is also an advantage for companies because it promotes transparency in financial transactions.
In relation to monitoring payments, thanks to digital banking apps, you have real-time and detailed control of your spending. This is particularly useful when creating budgets to control your personal finances and to help avoid over-indebtedness, which will damage your financial health.
It's also quicker and easier. As is the case with many instant money transfer services - e.g. when you want to split the bill for a dinner between two friends, all you need is their phone number. By following a few simple steps you can transfer funds to others via your mobile phone app. Finally, it reduces the costs associated with manufacturing money. Cash uses natural resources, something that has a negative impact on the environment.
Without a doubt, the payment sector is constantly innovating to offer users increasingly simple and instant payment methods. However, this doesn't just have an impact on an individual level, it is something that allows the social gap to be reduced via financial inclusion. It can boost the banking of the unbanked, allowing them to manage their spending and saving, as well as giving access to microcredit.