How will we pay tomorrow?

1. Mobile and Contactless Payments

Contactless payments are not new, but the COVID-19 crisis likely accelerated their adoption, whether via cards or smartphones. In the first four months of 2020, social distancing measures in Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden) led to an unprecedented 12% increase in contactless payments—a record for a region already known for minimal cash usage.

Apple Pay, Android Pay, Samsung Pay… mobile contactless payments continue to gain ground. Like contactless cards, smartphones use NFC (Near Field Communication) to exchange data over short distances with payment terminals. Consumers appreciate not having to enter a PIN and leaving their card at home. In the Netherlands, the number of ING customers using mobile payments nearly quadrupled between 2018 and 2019.

2. The Growing Role of Biometrics

Biometrics are increasingly used for authentication through fingerprints, voiceprints, or facial recognition, as with Apple Pay. Biometric authentication is seamless in practice and makes payments more transparent. In China, nearly 300 KFC restaurants tested "smile-to-pay," a facial recognition technology by Ant Financial (Alibaba’s payments subsidiary), which compares a customer’s face to a secure account photo. Carrefour China, in partnership with Tencent via WeChat, has rolled out facial recognition payments across all 210 local hypermarkets.

3. Paying with a Connected Object
The Internet of Things (IoT) is booming. Purchases can now be paid for using smartwatches, fitness trackers, or even connected jewelry like Mastercard’s K Ring. Connected watches and activity trackers such as Garmin Pay and Fitbit Pay also enable payments wherever contactless payment is accepted. Fitbit Pay, for example, is supported in over 20 countries by more than 160 banks and payment networks including Mastercard and Visa.

Partnerships between payment networks and industries are integrating IoT-based payments. Since 2017, GM vehicle owners in the U.S. can pay for fuel or drive-thru meals via Masterpass without leaving their car. Similar services are expected to expand to other countries.

4. The Rise of Peer-to-Peer (P2P) Payments

P2P payments allow individuals to quickly send money to others, typically for free, using a phone number, email, or username. Popular services include Venmo (PayPal), Cash App (Square), and Zelle in the U.S., as well as P2P solutions in PayPal, Google Pay, and Apple Pay Cash. Social networks like Facebook Messenger and Skype also support P2P transfers.

P2P payments are increasingly entering B2C. In the Netherlands, for example, ING offers retailers a way to send payment requests directly to customers at delivery.

5. Cash Isn’t Dead

Cash payments are undoubtedly declining. In some Scandinavian countries, electronic payments are the norm. Sweden, which introduced banknotes in 1661, may become the first cashless society: the remaining 56 billion SEK in circulation represents only 1.2% of GDP—the lowest in the world (the Eurozone average is 10%), and cash is used in just 6% of transactions.

Yet cash will not disappear entirely. Regulators and citizens worry about a cashless society. How would people pay if systems fail? What if a country loses all payment means during a war or cyberattack? Critics argue a cashless society risks bank monopolies or arbitrary account deductions, and increases surveillance under the guise of fraud or terrorism prevention.

A cashless society may not be desirable. Sweden, despite its advanced digital payment infrastructure, recently passed a law requiring banks to provide cash services to protect older citizens, the disadvantaged, and to prepare for potential cyberattacks.