Less bills and more Bizum: welcome to the era of digital payments

There is no way back. Digital payments are slowly eating up the ground that cash once occupied. The landing of open banking, which allowed users to transfer their financial information to third-party platforms like Bizum, has transformed how we purchase products, settle debt or pay taxes. The movements known as A2A (account to account) are fast, but also versatile: they work between different entities, at any time and on any date. And according to the Global Digital Payments Report, prepared by the North American consulting firm FIS, they will grow 13% by 2026, after having generated $525 billion in transactions in 2022.

In Spain, the instant payment platform Bizum exemplifies the success of this type of transactions. Its low operating cost, as well as ease of use, as a result of a simple interface, have brought the mobile application closer to all types of audiences. It is enough to have the beneficiary’s phone number to transfer an amount in seconds. According to data shared by the company, during the first nine months of 2023, 33% more purchases were made through Bizum than in the entire year 2022. fin tech Spanish, which was born in 2016 as a result of the collaboration of 34 banking entities in the country, exceeded 1,000 million euros in transactions in the first nine months of the year, 20.7% more than the same period in 2022.

On the other hand, bills and coins take up less and less space in people’s pockets. Although its use remains strong and continues to be the favorite means of payment in countries like Spain, the amount per transaction is falling. The FIS study predicts that in 2026 the share of cash in the value of global transactions will decrease by 10%, although the pace and reasons for the slowdown vary by country. In India and Thailand, for example, the growth of A2A payments is the main driver of the decline in cash. While others, such as the United States, are introducing new laws to slow its rapid decline due to the impact it can have on certain groups such as the elderly and the unbanked. “In Spain, Bizum has developed courses for older people to teach them how they can move their money using only their mobile phone,” explains Fernando Rodríguez, head of business development for the platform, by email.

Atman Moussaoui, a 26-year-old German teacher who teaches at a private academy in Valencia, admits that since the pandemic ended he hardly uses physical money: he has replaced it with a credit card and immediate operations with Bizum. The rent, for example, is paid through the latter because bank transfers “can take several days to become effective.” “Cash only helps me pay for things that I am not allowed to pay with a card: products that cost a few cents,” explains this user. Bizum already has around 25 million active users in Spain; almost half of the country’s total population.

A global trend

The financial transition is being more global than ever: in Latin America, fin tech Argentina’s Mercado Pago or Brazil’s Pix continue to accumulate users who do not hesitate to surrender to the benefits of digital: “It’s safer than carrying cash on you,” shares Jose Luis Guzmán, user of “De una”, an immediate transfer platform. in Ecuador. “If you are going to buy an $800 phone, it is dangerous to carry cash with you taking into account the insecurity in our countries,” he says.

The Brazilian Pix, launched in November 2020, doubled A2A’s share of e-commerce in transaction value between 2021 and 2022. And in China, applications such as AliPay or WeChatPay have experienced meteoric growth. The latter, also pushed by a series of services that it offers alternatively, went from having 50 million users in 2021 to 1,310 million in 2022.

Europe is not far behind either. Brite Payments, a fin tech Switzerland, which already operates in 34 markets across the continent, raised $60 million in a financing round the previous month. Its CEO and founder, Lena Hackelöer, believes that in the coming years there will be a broader shift from “open banking” to “open finance”, which means that “we will see more financial products and services with data exchange.” of clients (with their consent) that will lead to much more personalized services. Among them, we find claims settlements, e-commerce refunds, consumer financing or loans.”

However, it is not only these types of operations that have gained strength in the payments market. Electronic money—typically stored in virtual wallets—and digital currencies are also making steady progress. The World Payments Report, prepared by the Capgemini Research Institute, indicates that, together, they will represent approximately 30% of the total volume of non-monetary movements by 2027, which, according to the study, translates into 2.3 trillions of dollars, equivalent to the size of the Italian economy. At the regional level, however, digital payments will grow by 19.8% in Asia Pacific, 10.7% in Europe and 6.5% in North America.

In a Madrid hair salon in the Pueblo Nuevo neighborhood, run by Ninfa Pérez, 49, card payments are no longer accepted, but they are with Bizum. The owner of the business explains that she does it because having a Point of Sale Terminal (POS) means paying a monthly fee and that almost half of the clients already pay her per application. Financial companies have also improved the service they offer to traders. Mattia Gamberoni, regional head of Stripe—a payments firm from California (USA) with a presence in 46 countries—details that “A2A payment services mean lower commissions for the company, at the same time as a more agile service and a better experience.” seamless for the end user.” This is an opinion shared by Pilar Clavéria, Payments advisor at the Spanish Banking Association (AEB), who emphasizes the important collaborative work of banks in payments with public administrations: “It is now possible [a través de estas plataformas] the payment of pensions and social benefits, collection, social insurance, taxes and local administration fees.”

Cybercriminals lurk

Although all that glitters is not gold. Experts agree that the biggest problem facing the digitalization of the economy is cybercrime. In 2022, the Spanish police recorded a 72% increase in cybercrimes in the country compared to the previous year. Ricard Martínez, Doctor of Law from the University of Valencia and expert in data protection, defends that these applications must not only guarantee the protection of user data, but must also have a response in technical and economic terms in case this occurs. a security breach.

“They must be able to recover from any situation in the face of a serious crisis, because when a payment gateway of this capacity suffers an attack from which it cannot recover, there is a serious impact on the economy,” explains Martínez. He gives as an example what happened at Air Europa a couple of weeks ago: “The company immediately sent a message to all users. Which shows how important it is to have a global response mechanism to computer attacks.”

A2A transactions are already the payment leaders in Finland, Malaysia, the Netherlands, Nigeria, Thailand and Poland, according to the American consulting firm FIS. Latin America seems to have already taken the first steps and in Asia the transition seems to have no point of return. Spain, although still far from abandoning cash, continues to add users who see digital payments as a more comfortable, agile and secure option.

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