A cashless future: the UK’s digital payment landscape

By Gaia Lamperti

The rise of e-commerce spurred by the pandemic coupled with recent, innovative mobile technology favoured an all-time-high integration of digital payments across the world, with the UK leading the sector in Europe.

The UK Payment Markets 2021 report, released in June, revealed that the number of people registered for mobile payments increased by 75% in the last year to more than 17 million – one of the highest shares of online payment users globally.

E-wallets like Google Pay or Apple Pay are gaining popularity, helped by the new norms of Covid-19 which ebbed cash in favour of cards or digital transactions.  According to data published by BuyShares, the UK also ranks the largest digital payment market in Europe, generating 25% of the region’s total digital transaction value (just over $164 billion), followed closely by Germany, France, and Italy.

The deals

This year, the sector registered noteworthy deals like the case of Rapyd’s $300 million funding which bounced its valuation to $8.75 billion. The embedded finance firm enables merchants, challenger wallets, and other platforms to create new and simple mobile-friendly solutions to manage local payments.

Even payment giant Visa is turning to FinTechs to enhance its customer experience, having finalised two major acquisitions this year. In June, the company bought Swedish firm Tink for $2.1 billion, the acquisition of UK digital payment startup Currencycloud at $962 million followed just a few weeks after, confirming Visa’s digital ambitions.

Several other new digital payment firms are appearing in the UK landscape, battling out to capture a fair chunk of market share, as mobile payments in the country are expected to surge by 360% by 2024, according to BuyShares data.

Among the major ones, GoCardless has a proprietary tech platform to facilitate how recurring payments are collected; online payments technology provider Stripe is about to debut on the stock market via direct listing; and merchant services aggregator Square is expanding via acquisitions like the recent $29 billion-deal with BNPL firm Afterpay.

Traditional banks are not missing the roll call for the digital payment revolution either. This week, NatWest Group is announcing a further expansion of its partnership with Mastercard to bringing faster, secure online payments with the Pay by Bank app (PbBa) to complete purchases directly via the users’ banking app.

The public sector follows the trend

With this ‘new normal’ of payments pushing the private sector to adopt new technology for better customer experiences, the public sector is also looking at the benefits of digital payments and how they could reduce back-office costs.

Consumer satisfaction is the driver of this evolving payment landscape and as they have come to enjoy the benefits of dealing with a single platform for all of their purchases, the public sector will have to adapt its infrastructures to deal with increasingly cashless citizens.

Currently, less than 15% of public sector organisations have the ability to accept e-wallets payments, yet that is the favoured payment method by many consumers, even in spite of well-established traditional banks or credit cards.

The UK government has reiterated its interest and support for digital payments exploring areas for integration in the public sector, an option that would give access to not only a broad range of digital payments but a high-quality, secure, reliable and cost-effective payment service.

Last year, the UK Government’s Crown Commercial Service’s (CCS) Payment Acceptance Framework appointed Judopay, a leading mobile-centric payments provider, to help all public sector entities reduce their costs and create better, seamless payment experiences.

The move seemed to confirm that the changes we are witnessing in the payments sphere are here to stay, especially after the impacts of the Covid-19 pandemic. As a result, several institutions, from traditional banks to public entities, will have no choice but to keep pace with the constantly evolving sector of digital payments expecting impressive growth in the next four years.