Digital payments are a very useful tool for people's pockets around the world. They have grown by a factor of 10 in the last few years, mostly because technology has changed and more people are using it.
Part of the reason for these technological advances was that health restrictions and the recommended healthy distance forced financial and banking institutions to switch to digital and electronic ways of paying.
What are electronic and digital payments?
Digital or electronic payments are all those that are made with the help of any technological means, without using cash. Digital payments are useful for fast, transparent, and remote transactions.
All types of digital payments represent an opportunity to democratize the use of money and people's finances, however, they must meet certain requirements and overcome some challenges to ensure their implementation worldwide.
The World Bank estimated that, during 2020, transfers from governments to individuals will triple due to the pandemic. Digital payments have proven to be the right tool at the right time. Priorities now focus on their responsible implementation.
What are the challenges of digital and electronic payments?
The adoption and implementation of digital and electronic payments present new challenges, including the following.
Ensuring 24/7 functionality, allowing users to have access to their money at any time they wish.
Offer resolution mechanisms and customer service easily and simply, in case of any problem with the disposition of their money. Everyone hates to waste their valuable time in transfers and waiting in line at traditional banks.
Ensure mechanisms to protect people's money. The implementation of biometric security measures, on which digital payments are betting, must also comply with safeguarding the personal data of its customers.
The adoption of payments has among its main challenges a common point: to generate confidence in all senses of customers. The next billions of possibly new users will be slow to trust and will act carefully, which is the right thing to do. Think about how many people in our immediate family, mostly older people, are afraid to make a wire transfer because they don't want anything to go wrong.
What types of electronic and digital payments are there?
Digital and electronic payments are used and growing a lot in Mexico right now. Some of them got a lot of help from the government. Here are some of the most popular forms of electronic payments.
Debit and Credit Card Payments
Credit and debit cards are one of the most common ways to pay electronically, both in Mexico and around the world. These are a way to pay that lets you do several different kinds of transactions without having to bring cash, up to a certain amount.
Interbank Electronic Payment System
The second most widely used form of digital or electronic payment in Mexico is known as electronic transfers via the Interbank Electronic Payment System. This is a system developed and operated by the Bank of Mexico that allows the general public to make electronic payments, also called wire transfers, in a matter of seconds through internet banking or mobile banking. This system allows transferring money electronically between bank deposit accounts almost instantaneously.
CoDi and QR codes
We now have the well-known Cobro Digital, or CoDi. CoDi was also made and is run by the Banco de México. It makes it easier to pay for things with a cell phone. By scanning a QR code, which is a square barcode like the ones on grocery store items, a process is started where buyers and sellers can pay for a service or product and get paid. Both the buyer and the seller are told right away when the transfer is done.
Also called electronic wallets, e-wallets, or digital wallets. These are financial apps that have grown a lot thanks to a new type of technology called "fintech." They work like mobile apps, and to transfer money and pay for services, you have to link them to a bank account. At the moment, PayPal and Mercado Pago are the most well-known.
Lastly, there are payment gateways, also called payment links. These are platforms that are made for each online store or business, even though they are similar to wallets in some ways. When a customer puts an item in their shopping cart or basket and goes to pay for it, the online store sends them to a new web page, which is the payment gateway. Stripe, Flexio, Open Pay, and Pay U are some well-known ones.