Digital Wallets Explained (2024)

Today, we live in an increasingly cashless world. With the rise of e-commerce and mobile payments, consumers now expect the ability to pay from anywhere, at any time. No longer do we need to carry wads of cash or even plastic cards. Now we can pay with just a tap or click of our mobile phones.

This seamless, digital payment experience is made possible by digital wallets.

Did you know in 2022, UAE digital wallet market was valued at USD 3638.21 million, and is anticipated to grow with CAGR 12.12% for next 5 years.

Source

Digital wallets represent the future of payments and in this post, we look into why e-commerce is not the only industry that needs to be prepared for this change.

What are Digital Wallets?

A digital wallet is a software application or digital service that allows users to store payment information and/or money digitally for transactions. Rather than using physical wallets to carry cash and cards, digital wallets allow users to pay via their mobile device or the web.

Some popular examples of digital wallets in the UAE include:

• PayBy
• Payit
• e& money by Etisalat
• Apple Pay
• Google Pay
• Samsung Pay
• PayPal
• Careem Pay
• AliPay+
• CashPay

These digital wallet apps and services securely store money, payment methods like debit/credit cards, bank accounts, and gift cards. Users can easily access their stored payment methods to checkout online or tap-to-pay at contactless terminals in stores.

Leading digital wallets utilize tokenization for added security, generating digital tokens to represent your actual payment details.

What are the benefits of digital wallets for businesses?

Digital wallets offer several key benefits for merchants and businesses. By accepting digital wallet payments, companies can increase sales, reduce fees, and gain customer insights.

Increased Sales

The ease and convenience of paying via digital wallet encourages customers to make more purchases. Studies show that when businesses accept mobile wallet payments, average transaction values and purchase frequency increases. Customers are more likely to make impulse buys and repeat purchases when checkout is quick and seamless.

Lower Transaction Fees

Processing digital wallet transactions is less expensive compared to traditional payment methods. Credit card processing fees average 2-3%, while digital wallet fees are around 1%. For small transaction amounts, digital wallets can be nearly fee-free. These savings quickly add up for merchants with high volume.

Improved Customer Analytics

Digital wallets provide richer customer data than credit cards or cash. They allow businesses to track accurate transaction histories and purchasing habits. Companies can use these insights to better understand customers, personalize offers, and boost engagement through loyalty programs. The enhanced analytics lead to stronger customer relationships.

What are the benefits of digital wallets for customers?

Digital wallets provide several key benefits for customers looking to make purchases and payments on the go. Compared to cash or physical credit cards, digital wallets enhance convenience, security, rewards programs, and accessibility.

Convenience

Digital wallets allow customers to check out faster, both online and in stores. Instead of fumbling for the cards in your wallet, you can pay with your smartphone in just a few taps. Digital wallets also store payment information, shipping addresses, and more to expedite the checkout process. Customers can breeze through checkout without needing to input tons of information.

Many digital wallets also support contactless payments through NFC technology. You can hold your phone near a payment terminal to pay almost instantly. This is much faster than chip/swipe payments or handling cash.

Security

Digital wallets utilize encryption, tokenization, and other security measures to protect your data. This makes them generally more secure than physical payment methods. If your phone is lost or stolen, you can remotely disable the digital wallet to prevent unauthorized access.

Many digital wallets also support biometric login with fingerprints or facial recognition. This prevents thieves from accessing your wallet even if they steal your phone.

Rewards

Digital wallets often integrate with merchant loyalty programs and credit card rewards. Customers can store their memberships and earn points, miles, and cash back through the wallet. Rewards are applied instantly when you pay with a digital wallet.

Accessibility

Digital wallets centralize all your payment methods in one place. Customers can easily switch between credit cards, gift cards, coupons, and debit cards as needed. Everything is available right from your smartphone for maximum convenience and flexibility.

The Future of Digital Wallets

The future looks bright for digital wallets as more people embrace contactless payments and new integrations expand functionality.

Increasing Adoption of Contactless Payments

Contactless payments are on the rise globally. Digital wallets like Apple Pay, Google Pay, and Samsung Pay have helped accelerate consumer adoption of tap-to-pay. The COVID-19 pandemic further demonstrated the appeal of touchless transactions for safety and convenience. Surveys show a majority of consumers will keep using contactless even after the pandemic, indicating it is here to stay.

Integration with IoT Devices

As the Internet of Things expands, digital wallets may integrate with connected devices like cars, appliances, and smart home systems. For example, your digital wallet could automatically pay tolls while driving or manage payments for an autonomous vehicle. Appliances could automatically reorder and pay for consumables like detergent. And smart home hubs could draw from your digital wallet to pay for services like energy use.

Cryptocurrency Support

Some digital wallets already enable storing and spending cryptocurrency like Bitcoin. As cryptocurrency gains mainstream adoption, support within digital wallets is likely to grow. This will make it easier for average consumers to use cryptocurrency for everyday transactions. And integration with digital wallets provides a more familiar user experience compared to standalone crypto wallets.

Wrapping up!

Digital wallets have completely changed the game when it comes to convenience and ease of making payments. With a digital wallet linked to your debit or credit card, you can make quick and easy payments anywhere with just a tap or scan of your phone. There's no more fumbling for cash or cards.

The benefits of digital wallets are numerous - they save time, provide security, allow you to track spending, and work across platforms and devices. As more retailers and services adopt digital wallet payments, consumers will find paying for anything from a coffee to a cab ride is just a couple of taps away.

The future is all about streamlined, integrated digital experiences, and digital wallets fit right into that vision. Payments are frictionless yet secure. Transactions become embedded into platforms and apps rather than separate experiences. As money becomes more digital, digital wallets will continue leading the way.

For those looking for the ultimate payment convenience coupled with next-generation financial tools like digital wallets, PayBy is the solution you’re looking for.

PayBy delivers the future of payments today. Consumers get the convenience they demand while businesses get the advanced tools they need - it's a win-win for all.

Want to know more? Book a demo of PayBy today.

Subscription-Based Business Models

Various industries have seen rapid growth in subscription-based business models over the last few years.

According to The Subscription Economy Index report, the subscription industry has grown by 435% in the past decade. And it’s expected to grow even bigger and reach a market size of $1.5 trillion by 2025.

Seeing the data above, we can say safely that the subscription economy is here to stay.

Be it a gym subscription, an OTT subscription, a subscription-based service, or a subscription to a SaaS tool — researchers say that eight in ten adults use some form of subscription product/ service and will continue to do so.

But, what makes subscription business models so popular?

Subscription-based products/ services provide an affordable way for customers to access what they need. It has been proved that consumers won't mind paying for access to exclusive content/products/services.

On the other hand, subscription commerce allows businesses to provide their services/products directly to customers, ensuring a better customer experience and a long-term relationship.

Plus, the subscription model ensures a regular cash flow for businesses.

However, retaining the customer long-term is not easy. While the success of the subscription business primarily depends on the continuous value added by the business, the ease of payment is equally important.

In this article, we will discuss how subscription-based businesses can leverage digital payments to streamline recurring revenue, focusing on automation, reliability, and customer convenience.

Benefits of Digital Payments for Subscription Businesses

From having complete control of your billing cycle and cash flow to improved customer experience through seamless transactions — there are not one but multiple benefits of digital payments for a subscription business. Let’s look at them.

1. Improved Customer Experience

The most significant benefit of digital payment for subscription business is a seamless transaction experience for the consumers.

Digital payments make transactions faster. Consumers can set auto renewal mode with their preferred payment option to renew the subscription to the product/service.

Consumers can even save the payment information details in a secure environment so that they don't have to enter all the details every time a transaction happens.

They can simply set up the payment details once and enjoy the product/ service until they want to pause/cancel it.

2. Enhanced Security Measures

Digital payments are safer than the traditional payment methods.

With features like data encryption and fraud protection, tokenization of websites, and biometric payment methods, consumers trust digital payment methods.

For example, PayBy, which enables business growth with cashless payments, is trusted by some of the leading brands in the UAE.

The brand is also licensed by The Central Bank of the UAE, which helps them earn trust and a good reputation.

It has been given the highest levels of financial service approvals to conduct Stored Value Facility (SVF) and Retail Payment Services (RPS) operations.

3. Diverse Payment Methods

Digital payment methods allow businesses to offer multiple payment methods, facilitating international transactions.

The diverse payment methods enable customers to make cashless payments via 50+ payment modes.

These include some of the popular customer choices like credit/debit cards, net banking, AliPay+, PayBy, Botim, and other digital wallets.

Diverse payment options help subscription businesses reduce churn by offering various payment options for customers so that they can easily renew their subscriptions.

It also helps in global accessibility and currency support, which is essential for businesses that are operating globally.

4. Streamlining Billing and Invoicing

Subscription businesses can automate their billing processes with digital payment methods. You can create a custom schedule to collect recurring payments from customers.

All you need to do is set up a billing cycle of weekly, biweekly, monthly, or yearly payments for your subscription business.

With auto-debit on recurring payments, you can ensure continuous cash flow for your business.

By leveraging digital payments, subscription business owners can create branded invoices and automate sharing via email or SMS with their recurring customers.

You can also provide customers with instant payment confirmation on recurring purchases with branded digital receipts.

This helps build trust and reduce churn while minimizing failed transactions.

Plus, digital payment methods empower you and the customer for a cashless transaction with a click-to-pay functionality on your invoices.

Additionally, you can ensure further customer convenience by offering flexible payment plans, giving them full control.

For example, you can offer options like buy now and pay later, pause payments when they don't want the subscription, change the payment mode, and so on.

5. Leveraging Subscription Management Platforms

Subscription management platforms like PayBy let you integrate payment gateways with your existing website so you can host the payment page and customize it according to your needs.

And did you know that payment pages powered by PayBy are mobile-optimized, too?

PayBy also lets you offer customization and flexibility to your consumers.

So, users can choose from diverse payment modes.

For example, you can enable cashless transactions and online payments via various international and domestic credit cards, debit cards, and over 1.5 billion wallets.

By leveraging subscription management platforms, subscription businesses can keep a tab of their recurring payment status on a real-time dashboard.

Such real-time insights can help you identify inactive customers and payment failures so that you can make informed decisions to reduce customer churn.

Improve recurring revenue with digital payments

Payments are now an important part of the customer experience.

Subscription businesses that rely on recurring payment, offering multiple payment options, directly address the customer's need for a seamless payment experience.

Additionally, recurring payments help businesses to grow by ensuring continuous cash flow.

PayBy helps subscription businesses to collect recurring payments easily. It offers everything a business needs to collect a payment on schedule.

It gives complete control of the billing cycle and cash flow with auto debit on recurring payments.

Get started with PayBy today.

Do Payment Gateways Impact Checkout Conversion Rates

Irrespective of the industry your business is in, the checkout is often the make or break point.

According to Baymard Institute, the average documented transaction abandonment rate is as high as 70-89% across industries.

And one of the leading factors for abandonment is reported to be the payment gateway one offers.

In this post, we look into how payment gateways impact your conversion rate and what you can do to improve it.

How do payment gateways impact conversions

Let’s take a quick look at why and how the payment gateway impacts how many consumers complete a transaction:

1. Speed to checkout

A good payment gateway helps convert the consumer before they can change their mind about making the purchase. The lesser the time to think, the higher are conversion rates - enabling impulse and momentary interest in product/ service is key.

A very long checkout process or technical glitches that slow down the same can create room for drop-offs of even the highest purchase intent buyers.

Good payment gateways come with optimized checkout processes and a high uptime to ensure your business is always ready for transactions.

2. Security and trust

One of the primary concerns of online shoppers is the security offered by payment gateways. And the concern is justified.

Payment gateway breaches and fraud are common.

A report by Stripe mentions that 71% of businesses have reported that they have been targeted by payment fraud at least once.

An average payment gateway breach can cost USD 9.44 million - businesses don’t just need to secure themselves, but also ensure they give consumers a safe platform to make transactions.

3. Global accessibility

When selling globally, businesses need to adapt to consumer payment preferences rapidly. This is where the importance of a payment gateway that comes with currency support and multi-language capabilities becomes important.

At the same time, it is also important for businesses to adapt to device preferences over which consumers engage with them, giving them a way to checkout faster without the back and forth between pages.

Right from the currency, preferred payment modes, devices and more, a good payment gateway enables businesses to adapt to local preferences quickly.

Best practices to follow to ensure higher conversions

If your business has been experiencing lower conversion rates, here’s what you can do to improve the number:

1. Streamline the checkout process

Since the checkout process is a crucial step toward conversion, it’s important to keep it simple and remove any friction that can lead to customer frustration. Here are a few steps to remember:

• Keep the checkout process to a single page. Scrolling from page to page can distract a customer, causing a loss in sales. Further, it will also factor in if there are any internet issues.
• Offer alternative payment methods so that your customers have one or two preferred payment methods included. This will also attract customers who don't have access to or don't prefer the traditional payment methods.
• Implement a one-click payment system that’s convenient and encourages on-the-go shopping. In this system, the sensitive data is secured with PCI and tokenized on the website.
• Filling out unnecessary details like birthdays and anniversaries is time-consuming and often turns off buyers who are in a hurry. Instead, gather only the necessary data that are compulsory to complete the payment.
• One of the biggest inconveniences for buyers is when they have to sign up and provide login details before they can checkout. Look for a payment gateway that offers QR code payment or displays the bank account details where you can asynchronously process the payment without having to log in.

2. Offer diverse payment modes

Choose payment gateways that allow users to choose from diverse payment modes.

For example, with PayBy, you can enable cashless transactions and online payments via various international and domestic credit cards, debit cards, and over 1.5 billion wallets.

It easily integrates with your existing website, so you can host the payment page and customize it according to your needs.

And did we say that payment pages powered by PayBy are optimized for mobile phones, too?

3. Ensure speed and reliability

One of the biggest turnoffs for consumers is a slow and unreliable transaction process. Irrespective of the products/ services in the equation, this can result in the consumer losing trust in your business.

A good payment gateway enables you to offer speed and reliability to your consumers. They are also licensed to enable transactions by legal authorities, giving you and the consumer, further peace of mind.

For instance, Payby is licensed by The Central Bank of the UAE. It has been given the highest levels of financial service approvals to conduct Stored Value Facility (SVF) and Retail Payment Services (RPS) operations.

4. Ensure mobile responsiveness

Data says that at least 79% of mobile users have made a purchase at least once using their mobile phones.

So, ensure your payment gateway has mobile responsiveness for consumers who prefer to shop using their handheld devices.

A good payment gateway offers an optimized mobile pay page along with secure mobile payment modes.

5. A/B testing and analytics

Continuously A/B test different elements, designs, and functionalities of payment gateways to determine the best configuration that gives you maximum conversion.

You can A/B test the payment gateway among a subset of customers to understand the preference for local payment methods.

Track and analyze the data to understand how it’s impacting conversion and the average order value.

Are you ready to improve your conversion rates?

While there are many options in the market that can help you set up a payment gateway, Payby is one of the leading solutions in the UAE and is trusted by leading brands across industries.

PayBy’s solution caters to a vast array of industries, including fitness and wellness, insurance, travel and tourism, social products and services, restaurants and cafes, hospitals and healthcare, information technology and services, gaming betting and casinos, and more - alongwith the ability to scale with the size of your business.

Its easy integration feature works seamlessly with your existing technology – be it your website or app.

Payby comes with several other powerful features that go beyond improving your conversion rates, and boosting the experience you deliver to consumers. This includes the ability to generate digital receipts, invoices, payment links and more.

Want to know more about how Payby payment gateways can improve your conversion rate?

Get started with Payby today.

How do Payment Gateways Impact the User Experience

As businesses grow, they need to integrate a secure payment processing system. While some companies may still prefer to invoice customers to reduce card transaction fees, a report mentions that “£23.4 billion worth of late invoices are owed to firms across Britain.”

Late invoices can significantly impact the cash flow of the business. Accepting multiple payment methods not only improves the situation for business but also offers a positive customer experience.

A payment process that is quick, easy, and tailored to the local business environment enhances overall customer experience and loyalty.

Recap: What is a payment gateway?

Payment through a payment gateway is one of the many options that brands can integrate into their online stores for easy payment processing.

Payment gateways are a key component in electronic payment processing systems and work as the front-end technology that captures the customer payment information.

It then sends it to the merchant-acquiring bank, where the transaction is processed. A payment gateway is one of the popular modes of online payment today that is used across industries.

How do payment gateways impact customer experience?

Making a payment and checking out is the last mile in a buyer’s journey, and the transaction experience with the payment gateway can deeply impact the customer experience.

Here are some instances of how payment gateway impacts the customer experience:

1. Ease of use

Customers continuously seek convenience and ease of use, and a seamless online transaction experience can impact the overall customer experience positively.

For example, a user-friendly payment gateway interface makes it easy for customers to make a quick payment and checkout from the online store.

On the other hand, a cumbersome interface can be a big turnoff for an impatient customer.

2. Reduce friction

The payment gateway also helps to reduce the friction between the customer and the business by facilitating a hassle-free shopping experience.

Be it credit cards, debit cards, or digital wallets — payment getaways can offer a seamless transaction, boost sales, and reduce cart abandonment rates, especially for e-commerce stores.

How to set up a payment gateway for positive customer experiences?

If you’re introducing payment gateways for your website, here are some tips to help you achieve a positive customer experience:

1. User-friendly interface and checkout experience

The checkout process is the most crucial step in a buyer’s journey, and this should be made as seamless as possible.

That’s why a user-friendly payment gateway interface is important to impart customer satisfaction.

A poorly designed payment gateway interface can frustrate a customer, resulting in cart abandonment.

2. Mobile responsiveness and accessibility

Customers today prefer to shop on the go. With easy access to smartphones, brands need to make the shopping experience convenient for on-the-go shoppers.

Thus, they need to ensure that the payment gateways work smoothly across various devices, including smartphones.

Remember, the ability to facilitate mobile payment is no longer a luxury but a must for brands to stay ahead of the competition.

3. Security for trust

Payment gateways with robust security features, including encryption and fraud prevention measures, play a big role in gaining customers' trust.

Customers need to feel safe with their banking information, so brands that want to build a positive user experience must pay attention to safeguarding their payment gateways.

Creating trust is not just meant to keep the customer payment information safe but also to build customer loyalty, which translates to repeat sales.

4. Personalization

Tailoring the payment gateways based on customer profiles creates a more relevant transaction experience for the customer.

In an era when customers expect everything to be personalized, a tailored payment gateway for the customer will definitely help you earn some brownie points.

5. Transaction speed

Customers today prefer a fast and smooth transaction experience. Payment gateways that offer swift and smooth transaction experiences are surely going to earn some praise from customers.

Remember, a fast transaction speed not only satisfies the impatient customer but also helps improve the overall brand perception.

Payment gateway best practices

If you want your customers to have a great user experience while using your payment gateway, here are some tips for you:

Keep customer convenience in mind

Make it simple and easy for your customers. For example, if you’re in a subscription business, offer recurring payment options that help them renew their subscriptions easily.

You may also consider integrating various payment methods like payment through credit cards, debit cards, UPI, net banking, COD, cheque, etc., for your website so that customers can choose the best-suited option for payment.

Minimize risks

Ensure your payment gateways are capable of encrypting sensitive customer payment information like account numbers. It should also offer various verification procedures and secure card information.

Always use SSL-certified payment gateways along with a secure logo.

Clear communication

Always maintain clear and transparent communication with customers. Keep them updated about any failed transactions, payment status, and due payments so that customers feel assured.

Maintaining clear communication helps to build trust, which improves sales.

How to choose a payment gateway for a better user experience

There are several options to consider while picking a payment gateway. Here are some pointers for you to consider:

Know the preferences of your customers

To positively impact the user experience, it's important to know what payment gateway your customers are already using.

If you choose payment gateways your customers are already familiar with, then you'll see better adoption, and you'll run into lower risks.

Check for integrations

Check for the API integrations of the payment gateway and if it will work with your existing technology.

Choosing a solution that doesn't integrate with your technology will be of no use and will slow down the entire process.

Look for robust security

Security and fraud prevention are of utmost importance, so you need to be vigilant with the security system of the payment gateway.

Look for PCI-compliant companies that uphold security provisions for electronic transactions.

With PCI compliance, you can be assured that your customer's payment information will be protected and secured from theft.

Consider the fees

Compare the costs of the payment gateways and how they will affect the security cost.

For example, if the payment gateway has a low fee but you have to invest in its security and fraud detection, the overall cost can increase.

Check their market worth

Invest in a payment gateway that is trusted by customers.

Avoid payment gateways that don't have a strong security history to prevent customers from abandoning their carts or, even worse, cases of fraudulence.

Choose payment gateways that have a respectable clientele list.

Opt for flexibility

Flexibility is one of the key attributes to look for when choosing your payment gateway.

Remember, each customer is different and has different preferences, so offer them a solution where they can quickly switch between credit cards, debit cards, UPI, Android, and Apple Pay, etc., and have a smooth transaction experience.

Picking the right payment gateway for your business

Now that you’re ready to set up your first payment gateway, try PayBy — it seamlessly integrates with your existing system, and you can set it up easily. Licensed by The Central Bank of UAE, PayBy is trusted by some of the leading brands in UAE.

PayBy can manage all end-to-end transactions via domestic and international credit cards and integrates with your website and apps easily.

Get started today.

The Evolution of Online Payments

Like it or not, money is a crucial part of our life. It allows us to buy things that let us live a comfortable and decent life. However, money has been in existence in some form or another for just about 5000 years.

Before that time, there was a barter system that ancient people used to trade. Slowly, as humankind evolved, money evolved, too.

From printing the first currency note to cashless transactions and bitcoins, needless to say, technological advancements have revolutionized payment methods.

We’re here to take a step back and deep dive into understanding the evolution of online payments.

The Barter System: Trade in Ancient Times

Long before money was invented, ancient people used a barter system to exchange goods and services. This oldest form of commerce, which was practiced for centuries, involved two individuals negotiating their goods or services before they exchanged them in the form of trade.

For example, a farmer may exchange his crops for a cow or salt. The quantity of rice to exchange used to depend on the perceived value of salt or cattle.

It is believed that the first barter system was introduced by the Mesopotamians all the way back to 6000 BC. Later, it was adopted by the Phoenicians, who used it to barter goods with others across the oceans.

With the rise of the Babylonians came a further improved bartering system when goods were exchanged for food, tea, weapons, and spices.

Salt was another common and expensive merchandise that was exchanged. In fact, the Roman soldiers were paid their salaries with salt.

In the Middle Ages, Europeans who traveled around the world started to barter crafts and furs in exchange for silk and perfume.

Musket balls, deer skins, and wheat were some of the common barter items used by the colonial Americans.

However, the barter system had its own limitations, too.

The most common problem with the barter system was its inefficiency.

For example, if a farmer wanted to exchange his rice for timber, he had to find someone who would have timber and wanted to exchange it for rice. The other problem was ensuring a fair exchange because the perceived value of goods and services varied.

The Introduction of Currency: Simplifying Trade

As we discussed, primitive societies used the barter system to exchange goods and services. Some ancient tribes also bartered goods in exchange for shells. However, the barter system had its own pitfalls, which slowly led to the invention of metal coins.

The development of metal coins is estimated to date back to 700 to 500 BCE. Since the coins were standardized, trading became easy. The invention of gold and silver coins also made trade easy and convenient between countries. A country that had a surplus of any item could easily sell it to another country in exchange for coins.

The transition to paper notes happened in 1260 CE when the Yuan Dynasty of China switched to paper currency from coins. However, some parts of Europe continued to use metal coins until the 16th century.

Introduction of banks

Later, once the banks became functional, they started to replace the coins using paper notes. People could take these notes to the bank to exchange for gold, silver, or coins. The paper money made it easy for everyone to buy goods and services.

The shift to paper money simplified international trade. It enabled the movement of goods from one country to another, migration, and settlement, and created socioeconomic distinctions.

The Advent of Electronic Payments

Although one may assume that electronic payment methods like credit and debit cards are modern payment methods, the earliest history of credit cards dates back to 5000 years ago in ancient Mesopotamia. Inscriptions bearing mutual agreements on clay tablets were used when people wanted to buy at the moment and pay later.

Fast forward to modern times, and those ancient clay tablets paved the way for store cards when merchants issued cards to farmers as a receipt of loans. The farmers who didn't have money to pay upfront used to pay later once crops were harvested.

In 1950, the Diner's Club became the most popular and widely accepted form of credit card when its founder left his wallet at home while out dining. Diner's Club users would charge their meals to the card, and the restaurant would send the bill directly to the Diner's Club. The cardholders had to pay the bill to the Diner's Club at the end of the month.

In 1958, American Express, originally a freight company, came up with its first credit card that allowed its customers to pay bills via the credit card.

In 1966, the first interbank card was released when a group of California-based banks came together into a partnership. This card eventually evolved into the present-day MasterCard in 1979.

Credit cards got a new dimension with the advancement of technology. In the 1960s, an IBM engineer affixed magnetic tape on the back of the card so that the user got the updates when their cards were swiped at a point-of-sale.

The popularity of credit cards saw some marked differences in buyer behavior. Different research studies have proved that credit cards increase the pleasure of buying, and users are willing to pay higher prices when given a chance to pay through credit cards.

One hypothesis suggests that since credit cards reduce the "pain" of payment, they remove the holds on expenditure. A neural mechanism study associated with credit card purchases showed that a strong activation at the striatum occurs on the onset of credit card cue.

The Digital Revolution: Birth of Online Payments

Online payment is an irreplaceable part of our modern lifestyle. The origin of online payment can be traced back to 1871 when Western Union introduced online money transfer in the US.

For the first time, people could pay for goods without being physically present for the transaction. However, the online payment mode saw rapid growth only after 1960 when the US Advanced Research Projects Agency Network laid the foundation of the modern-day internet.

Since then, the online payment landscape has rapidly evolved.

Key Milestones

In 1994, the Stanford Federal Credit Union became the first financial institution in North America to launch its online banking service for its customers.

As the banking industry saw the digital transformation, more financial corporations started embracing this journey.

In the late 90s, PayPal entered the market and became the first global payment service provider.

Starting from the early 2000s, different companies across Asia started adopting the online payment mode.

The UAE's banking sector has been at the forefront of digital transformation. Banks like Emirates NBD and Abu Dhabi Commercial Bank have pioneered online banking services, significantly enhancing customer convenience and transaction efficiency in the region.

Alibaba was established in 1999 as the first ecommerce platform in China.

The next in line was the rise of digital wallets, which came into existence in 2011 when Google Wallet was launched ( Now known as Google Pay).

Today, most digital wallets are powered by cloud technology that offers inbuilt security and on-demand scalability and comes with intense processing features.

As the global landscape shifted towards electronic and online payments, the UAE too made significant strides in embracing digital technology. The introduction of real-time payment systems in the UAE, as part of a broader Middle Eastern strategy, signifies a pivotal move towards digital adoption.

Notably, initiatives like the GCC RTGS (Real Time Gross Settlement System) and the Arab Regional Payment System (BUNA) have been instrumental in standardizing and enhancing payment efficiency across the Gulf and Arab regions.

These efforts reflect the UAE's commitment to modernizing its payment infrastructure, aligning with global trends while catering to regional needs.

The Rise of Mobile Payments and E-Wallets

As online payments and digital wallets gained prominence, we saw a sharp rise in mobile payments and e-wallets. As smartphones became affordable and accessible to all, mobile payments saw rapid adoption among the population.

With e-wallets, carrying cash becomes unnecessary as your money is safely stored on your smartphone. Moreover, with mobile payment, you don't need to look around for ATMs to withdraw money— you can make a payment as long as you have a smartphone and internet connectivity.

Consumer behavior also witnessed a stark difference with the change in technology. Businesses started to offer payment in digital mode to improve the customer experience, while the convenience of digital wallets paved the way for more online stores, the COVID-19 pandemic forced businesses to further adopt cashless and touchless payment modes.

Consumers today prefer to shop from the convenience of their homes with just a few clicks. As predictions say, 21.2% of total retail sales will happen online by 2024.

Reflecting global trends, the UAE has seen a surge in mobile payments and e-wallet adoption. Driven by a tech-savvy population and initiatives like Dubai's Smart City project, mobile payments have become a staple in the region's bustling commerce.

The Emergence of Cryptocurrencies and Blockchain

While digital wallets and online payment have now stayed for many years and continue to offer a safe and convenient mode of transaction, the development of new technology is making way for new payment options. Bitcoins and cryptocurrency are emerging as powerful financial currencies that merchants can transfer between one another without the involvement of banks. Such a decentralized transaction mode has both its pros and cons. Some of these include:

Advantage of cryptocurrency

Since no banks or intermediaries are involved, it eliminates the possibility of a single point of failure.

Decentralized transactions are secured by public and private keys, along with different incentive systems.

Cryptocurrency transfer is faster than traditional systems as no intermediaries are involved.

Cryptocurrency investment can earn you profit as the market grows. It’s valued at USD 680 billion as of November 2023.

Disadvantage of cryptocurrency

Though cryptocurrency claims to be an anonymous form of transaction, certain agencies like the FBI can follow the digital trail.

Cryptocurrency is often used for malpractices. For example, hackers prefer cryptocurrency for ransomware.

Although its transaction is decentralized, in reality, the ownership is highly concentrated. There are roughly 100 addresses that circulate 15% of the total value of Bitcoin.

The Future of Payments: Towards a Cashless Society

If we look back to the history of the evolution of online payments, it’s only logical to predict that we’re slowly heading toward a cashless society. Although it might take some time to become completely cashless, it’s a fact that we’re slowly progressing toward becoming a cashless society. As technologies like AI, biometrics, and contactless transactions evolve along with the changing customer behavior, a cashless society is what looks the most logical next step.

While we still can't predict where we will be in 2030 or 2060 in terms of cash, near-term projection sees a continuous decline in cash transactions. Cash projection in North America is only 8.7% by 2024.

So, coming to the most pertaining question, if we are going to be a cashless society — the answer is a yes and a no. While many countries are heading fast towards embracing a cashless society, some countries will still be using cash transactions at least for the next few years.

Conclusion

From barter systems to modern-day bitcoins, payment methods have been evolving steadily with the evolution of mankind. As new technology has come into existence, it has added new payment methods to the system, which has greatly influenced buyer behavior.

The buyer who once couldn’t think of going out of the house without carrying their wallet can now comfortably go out with their smartphone, do shopping, and pay bills for their dinner.

While we are steadily heading towards a cashless society, only time and technology will define what's in store for the future of payment and if we will ever become a completely cashless society.