2024 has been another year of advancements, with a mixture of highs and lows, in the payment industry. Fintechs (financial technology companies) continue to improve current and emerging payment methods in an effort to provide consumers with the most convenient ways to pay.
Below, we look into the following payment trends:
- The future of cash payments
- The rise in the adoption of digital payments and currencies
- Growing interest in payment orchestration
- Widening role of AI in payment processing
- Continued efforts in making open banking a reality
In 2025, we expect these innovations to gradually become more mainstream and accessible to large and small businesses alike. This article aims to give SMBs a quick roundup of the state of payments and what to expect in the year to come.
1. Cash will remain stable despite a continued decrease in use
There is no doubt that we are headed toward a cashless society—but how soon? Certain demographics continue to favor cash as a payment method, so expect to continue accepting cash payments next year.
Cash Use Continues to Decrease
According to the 2024 Diary of Consumer Payment Choice, cash use has consistently decreased since 2016 (31%). The decline accelerated during the COVID-19 pandemic, from 26% in 2019 to 19% in 2020. By 2023, cash use had cut down to nearly half, registering only 16%.
We see this trend to continue (though gradually) beyond 2024 for a couple of reasons:
- In-person sales decline; online transactions rise. The same report showed a growing consumer preference for online shopping. In-person sales made up 81% in 2022 vs online sales at 19%; in 2023, in-person sales fell to 78% while online sales were at 22%.
- Digital wallets have grown in popularity. Consumers are also increasingly using digital (including mobile) wallets more for in-person payments over cash. Worldpay’s 2024 Global Payments Report showed digital wallet use rose from 24% in 2020, to 30% in 2023. Worldpay projects this rate to reach 46% by 2027.
Cash Use Decline Will Soon Hit a Limit
While it’s clear that more and more consumers prefer non-cash transactions, cash remains the strongest alternative after cards. The same Federal Reserve report on consumer payments showed that, in 2023, customers often used more than one mode of payment. Individuals who say that they prefer to use their credit cards still pay with cash 16% of the time, while those who favor debit cards still use cash for 20% of their transactions.
We believe that cash will still be significant for many consumers in 2025 (and beyond) as:
- Certain demographics continue to prefer cash. Low-income households and consumers over the age of 55 continue to favor paying in cash for 22% of their transactions. The average use of cash for transactions with a value of $25 and below increased slightly from 4.9% in 2022 to 5.2% in 2023.
- The amount of cash customers remains higher compared to pre-pandemic levels. By the end of 2023, 79% of consumers still brought cash with them, valued at an average of $74 per day. This amount is higher compared to the average on-person daily cash holding of $60 before the pandemic.
- Government bodies support the use of cash for unbanked consumers. The Payment Choice Act bill of 2023 was introduced in Congress just last June, protecting consumers’ rights to pay in cash for in-person transactions equal to or less than $500. Several states, including New York and the District of Columbia, have also made it illegal for businesses to refuse to accept cash payments.
2. Consumer-driven innovations in digital payments will continue
The latest Consumer Holiday Spending Study from TSG (The Strawhecker Group) and The Electronics Transactions Association (ETA) revealed that emerging payment methods adoption ranges between 19% and 78% in 2024, with conversion rates as high as 86%. This is driven by factors such as consumer demand for payment convenience and the rising digital public infrastructure, such as digital ID systems that integrate application procedures with digital payment options.
According to Juniper’s Contactless Payment Market report, this increase in adoption resulted in transactions valued at $7.4 trillion. And as consumer demands for more convenient and secure ways to pay become the new normal, we foresee fintechs continuing to improve digital payment services in 2025 and beyond.
Tap to Pay Is Outpacing Payment Terminals
Contactless payments are starting to overtake payment terminals, with tap to pay emerging as the most popular thanks to the growing number of consumers using their smartphones to make payments. Tap to pay recorded the highest conversion rate of 86% in 2024, according to the same report from TSG and ETA.
Additionally, tap to pay is steadily extending its reach beyond retail and into the hospitality industry. Post-pandemic travelers prefer to book, pay, and even send tips digitally. According to PYMNTS’ money mobility tracker report, 73% have expressed their interest in using their mobile devices to check into hotels, order, and pay for food.
QR Code Payments Will Drive Cross-border Transactions
The TSG and ETA research also highlighted a 2% increase year over year (YoY) in QR codes as a payment method. While comparatively small, we foresee a steady growth in adoption, especially as countries around the world have begun exploring the potential of QR codes to boost cross-border commerce. According to FXC Intelligence research, the APAC region, in particular, is standardizing its QR codes to enable faster cross-border transactions.
Buy Now, Pay Later (BNPL) Use Will Expand Beyond Retail
The same study from TSG and ETA noted a 6% increase in BNPL adoption, from 36% in 2023 to 42% in 2024. This boost is primarily attributed to Gen Z (62%) and millennials (56%) using BNPL to fund their purchases.
We see this growth in adoption to continue through 2025 for a number of reasons:
- Consumers continue to struggle with the effects of inflation. CBS News analysis of Federal Reserve data found that grocery inflation rose by 1.3% in September 2024 and is projected to grow by 1.6% in 2025. This year also saw the electricity rate increase by $0.18 per kWH.
- Consumers look for card-linked installment plans to manage their expenses. The latest Paycheck-to-Paycheck report from PYMNTS reveals that nearly 25% of card holders apply for installment payments for their necessities.
- Card networks are beginning to collaborate with BNPL platforms. Just recently, Visa partnered with Affirm to extend its Flexible Credential program to BNPL payments. This allows customers to choose BNPL in any establishment that accepts Visa. It will include online payments for non-retail purchases such as travel bookings and professional services.
Learn more: Digital Payment Market Growth & Statistics
3. Payment orchestration adoption will gain momentum alongside global commerce
According to Research and Markets, the payment orchestration market reached $2.53 billion in 2024, up from $2.17 billion in 2023. This growth is driven primarily by the need to manage the growing complexity in the payment ecosystem and increasing competition among merchants in providing payment convenience.
Additionally, financial institutions around the world have been working on payment interoperability via ISO 20022 to promote faster and much simpler transactions. Payment orchestration’s value-added service aligns well with these efforts, giving merchants access to local payment methods (such as BNPL) without the hefty fees.
So, as regions around the world continue to actively upgrade their payment infrastructure for simplified global commerce, the demand for payment orchestration platforms will also increase.
Related: What Is a Merchant Account?
4. Crypto payment adoption will grow as centralized and decentralized payments converge
Since Bitcoin’s launch in 2009, cryptocurrency has always been treated more as an investment than a form of payment. The growing interest in decentralized currencies is among the major payment industry trends today. According to eMarketer, Bitcoin payment adoption in the US alone has grown at an average rate of 21.3% since 2022 and will continue till 2025.
But this would not have been possible without addressing two critical factors:
- Software availability. Many cryptocurrency platforms now include a payment gateway integration with POS systems and payment processors.
- Volatility of cryptocurrencies. The first stablecoin, BitUSD, was created in 2014 and is backed by the BitShares blockchain.
In 2025, we see cryptocurrencies becoming more mainstream in the payment space for the following reasons:
- Web 3.0 gaining momentum. The next version of the internet allows for decentralized financing. Many fintechs like Appinventiv are developing easy-to-use web3 payment solutions.
- Crypto platform partnerships with Visa and Mastercard. Card network giants like Visa see growing consumer interest in crypto-connected cards and have partnered with 50 crypto platforms on card programs since 2021.
- Growing interest in implementing CBDCs. With the popularity of digital wallets, 134 countries are now exploring the development of a digital version of their fiat currency in the form of central bank digital currencies (CBDC). The Atlantic Council CBDC tracker shows three countries that have fully launched CBDC while 20 are in the development stage, including the United States.
Related: How to Accept Crypto as a Business
5. Open banking will play a major role in the advancement of real-time payments
In short, open banking will allow for faster payment authorization because financial data is readily available, answering the current demand for financial transparency. In the U.K., open banking transactions were valued at $13.6 billion in 2023, according to Statista. Globally, transactions amounting to $57 billion were completed via A2A payments in 2023 and are expected to reach $330 billion by 2027.
Open banking will continue to be one of the most watched global payment trends for 2025 and beyond. Already, fintechs are making instant payments available in mobile apps and digital wallets, which cost merchants only a few cents compared to credit card transactions. The latest Juniper Global Instant Payment Market report shows that instant payment transactions in 2024 will be valued at $22 trillion.
Learn more: Real-time Payments Growth & Adoption: What It Means for SMBs
6. AI’s role in payment processing is expanding
This year, access to generative AI became more mainstream, with adoption reaching as high as 65%, according to McKinsey’s State of AI 2024 report. Developers are now actively harnessing AI’s capabilities to provide more efficient payment processing features.
We’ve started to see AI being used to provide more personalized checkout experiences through smart payment routing, where AI can boost payment orchestration’s capability to route payments to payment processors with the best chance of approving transactions.
For 2025, AI will allow fintechs to develop super apps with increased personalization capabilities. Already, we see intuitive digital wallets that offer a variety of features based on the user’s activities and preferences.
AI will also continue its role in enhancing payment security as consumers’ demand for convenient payment processing grows. According to Discover’s 2024 Payments State of the Union study, 67% of consumers are open to using their digital identity in exchange for a more seamless payment process.
Frequently Asked Questions (FAQs)
These are some of the most common questions we see about payment trends.
As consumers demand convenient and fast payment options, fintechs are leveraging the potential of cryptocurrency integration and open banking (A2A) to provide real-time or instant payments.
Technology development is focused on payment tools that offer frictionless processing. This includes the availability of payment orchestration platforms, interoperability of crypto and fiat currencies, and the growing role of AI in payment processing beyond security.
Digital payments, particularly mobile/digital wallets, are one of the fastest-growing payment methods today. Instant payments are also picking up and are set to rival credit card payments by 2028.
Consumer banking is becoming increasingly digital, with the development of banking apps that make transactions convenient, seamless, and personalized.
Bottom Line
The evolving consumer payment trends are heavily influenced by the demand for convenient and diverse payment options and the need to keep up with the growing pace of global commerce. For SMBs, the checkout transaction can make or break the sales experience in almost any buying situation. It is key to be able to plan ahead and keep up with new payment technology as it becomes available.
So, if you aren’t taking the steps to offer seamless transactions through one-click online payments, BNPL, QR code payments, and voice command payments, among other services, you’re likely missing out on sales.
