The payment industry's biggest trends in 2021—and the pandemic's impact on digitization in the payments landscape

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    The Payment Processing Industry Overview

    The power dynamics in the payments industry are changing as businesses and consumers shift dollars from cash and checks to digital payment methods. Cards dominate the in-store retail channel, but mobile wallets like Apple Pay are seeing a rapid uptick in usage and paving the way for the future of payments.

    At the same time, e-commerce will chip away at brick-and-mortar retail as smartphones attract a rising share of digital shopping. Digital peer-to-peer (P2P) apps are supplanting cash in the day-to-day lives of users across generations as they become more appealing and useful than ever.

    And change is trickling down into bigger industries long-dominated by cash and check, like remittances and business-to-business payments.

    In response, providers are scrambling for market share. Skyrocketing consolidation that creates mega-giants is forcing providers to diversify in search of new volume.

    The Payments Industry Explained

    In this report, Insider Intelligence examines the payments ecosystem today, its growth drivers, and where the industry is headed. It begins by tracing the path of an in-store card payment from processing to settlement across the key stakeholders. That process is central to understanding payments, and has changed slowly in the face of disruption.

    The report also forecasts growth and defines drivers for key digital payment types through 2024. Finally, it highlights three trends that are changing payments, looking at how disparate factors, such as new market entrants and surging fraud, are sparking change across the ecosystem.

    Payments Industry Trends

    In-store payment methods

    In-store payment methods are still on the rise in the US, comprising 89% of retail volume this year. Debit and credit cards continue to lead the segment, as cash and check usage slowly ticks downward. But surging contactless penetration is set to bring mobile payments in-store to prominence for the first time in the years ahead.

    Ecommerce growth

    Surging e-commerce will eat away at in-store payments' share of overall retail. PCs will continue to lead the way, but smartphones will inch closer to being the top channel to purchase with, in turn driving growth. At the same time, new payment tools, like voice assistants, wearables, and even cars will begin to give consumers even easier ways to pay.

    Digital payments

    The digitization of payments isn't just contained to retail, though, with real time mobile P2P payments, digital remittances, and digital business payments continuing to blossom as change spreads through the ecosystem.

    Credit cards

    Payments made via credit card will grow from $1.75 trillion in 2019 to $1.82 trillion in 2024, marking a 0.79% CAGR. High credit appetite and robust rewards programs — which are set to expand as issuers aim to keep their payments solutions top-of-wallet — will entice spending and help the segment tick up, though growth will be slower than inflation. 

    The financial institutions mentioned in this report are: ACI Worldwide, Adyen, Amazon, American Express, Apple, Bank of America, Braintree, Bento for Business, Capital One, Citi, Diebold Nixdorf, Discover, Earthport, Elavon, EVO, Facebook, First Data, Fiserv, FIS, Global Payments, Goldman Sachs, Google, Green Dot, Honda, Ingenico, Intuit, JPMorgan Chase, Kabbage, Macy's, Mastercard, MICROS, MoneyGram, NatWest, NICE, NCR, Oracle, Paymentus, PayPal, Rambus, Remitly, Ria, Samsung, SiriusXM, SF Systems, Square, Stripe, Synchrony Financial, The Clearing House, Target, Tipalti, Toast, Transfast, TSYS, Venmo, Verifone, Vocalink, Visa, Walmart, Wells Fargo, WePay, Western Union, Xoom, Zelle

    In full, the report:

        • Traces the path of an in-store card payment from processing to settlement across key stakeholders within the payments landscape, including payment processors, service providers, and credit card networks.
        • Discusses emerging alternative business models  to card payments.
        • Examines the shifting role of key categories of financial institutions as the ecosystem digitizes and matures.
        • Forecasts growth in key categories, including in-store payments, e-commerce, real-time mobile P2P payments, remittances, and B2B payments.
        • Identifies three trends set to shape payments in 2020 and evaluates what changes the ecosystem is set to undergo.

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