No Going Back as Digital Payments Transformation Has Cemented Itself, Report Suggests

Digital identity, new ways to move funds, the speedy pace of innovation, and changing consumer payment preferences are all quickly altering the payments arena, suggests the latest payments report from Deloitte Consulting LLP.

“The things that really stood out the most for us when we looked at the data is how revenue flows are changing, preferences are changing, and where the investment is occurring,” Zachary Aron, principal and head of payment at Deloitte, tells Digital Transactions News. “We’ve hit the tipping point of the digital transformation of payments.”

During the pandemic, many payments players accelerated their digital-payment plans, especially as consumers demanded online methods to reduce the need for face-to-face payments, Aron says. Now, consumers have this expectation and are adopting a desire for real-time payments.

This transition to digital requires securing the digital identities of consumers and providers. That’s another trend affecting the U.S. payments industry. “Getting identity right is going to be the next big critical piece,” Aron says. “We’re solving the infrastructure side first. That’s where a lot of the questions have gone.”

Solving more advanced digital-identity issues will follow, but questions will have to be answered for that to happen. For starters, Aron says, these questions will be about who will manage the digital identities and how these identities will be managed. Standards and governance protocols will need to be devised. Digital identity might cover biometric data, including life factors like data and place of birth. It could be combined with government-issued identity records, like passports and driver’s licenses.

Another layer is the new and faster ways to move funds. Real-time payments already are in use, such as for paying gig workers or when sending person-to-person payments. “It absolutely has cash in the crosshairs,” Aron says of real-time payment methods. As it develops, two changes will happen. Network providers will become more involved in real-time payments and limits will begin to rise. Earlier this year, Nacha, the automated clearing house rules maker, raised the same-day ACH limit to $1 million from $100,000.

“We anticipate continued maturity of RTP in the United States over the next year, with both customer preference and economic necessity spurring deployment and uptake,” the report says.

And then there is the payments industry’s innate drive to innovate and develop new methods and how they often outpace regulations. Deloitte suggests U.S. regulators will begin to take on a more active role in regulated financial instruments, such as deposits, in regulated organizations, such as banks and money-transmission providers, and in customer-focused regulation, such as those dealing with disclosure and financial inclusion.

With all these factors at play, the underlying thread is the shift from digital as a feature or channel to a foundational element of payments. “We believe in the next one to two years we won’t have any of our clients talk about needing to [make] a digital transformation,” Aron says. “Digital is just part of the infrastructure.”