Rapid digitization across the globe is transforming all aspects of our lives, and payments are the most crucial element. From online marketplaces and streaming videos to cross-border money transfers, almost every digital activity relies on a payment system. J.P. Morgan’s proprietary POWER+ framework outlines five mega-themes that are shaping the future of payments. These mega-themes account for about $54 trillion in global payment flows—and it will only continue to grow.
Introducing the POWER framework:
- Platforms: As digital platforms, ecosystems and marketplaces continue to disrupt traditional industries, they are further coalescing their power and transforming themselves into “platforms of platforms,” more commonly known as super apps. In just over a decade, global payment volumes for these entities have increased to $36 trillion, making them huge disrupters to both traditional retail models as well as the world’s banking and financial systems.
- Online: Since the birth of the internet more than 30 years ago, the online world has been characterized by a constant flux of new innovations and omnichannel business models. We look at some of the key themes currently shaping online payments, like the ongoing rise of e-commerce, the growing need for digital identity solutions and how online platforms are fundamentally changing the structure of the labor force.
- Wallets: It’s hard to talk about wallets without talking about what they have historically been used for: to store money. Economists define money as something that serves as a medium of exchange, a unit of accounting and a store of value. Digital money is now capturing a growing share of total transactions with cash falling from a 40% share a decade ago to a 26% share today.
- Embedded: Embedded payments refer to the increasingly effortless way consumers are able to make contextual and contactless financial transactions – anytime, anywhere – through connected devices that serve as wallets, like cars, homes or wearable technology. Embedded solutions add a new level of convenience and speed to the payment process and are a key element of the invisible banking concept. In this scenario, financial services are seamlessly embedded into daily activities and have become so automated and frictionless that consumers no longer notice them.
- Real Time: Whether it’s a business making a cross-border payment, a worker sending remittances to his own country, or e-commerce consumers wanting to make instant transactions, the demand for real-time payment capabilities is growing. While there is much work to be done before the reality of instant payments can be realized in more than a handful of use cases, significant progress toward this goal will be made in the coming decade.
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