Over the last few years, the use of digital payments has accelerated, as people have come to enjoy the convenience of fast transactions, and as many retailers have phased out the acceptance of cash payments and paper checks .
Then the pandemic came along and accelerated things enormously. Suddenly, most retailers weren’t able to take cash even if they wanted to, and consumers across the world were forced into paying for pretty much all their goods and services digitally.
The result of this is that digital payments are now far more commonplace within day-to-day life than they once were. Research by Discover Global Network has found that a third of consumers started using digital payments within the last year, and almost half are now more comfortable paying digitally or using e-commerce sites than they were pre-pandemic.
In this blog, we’ll explore what all this means, how the landscape is changing, and the implications of the popularity of digital payments on the payroll sector.
What are digital payments?
Firstly, it’s important to define exactly what digital payments are, because the concept is so broad. At a base level, it means using digital technology to make transactions, but there are many different ways of doing this:
- Online electronic payments: the means of making an electronic payment between two parties (for example, buying something from Amazon or eBay)
- Mobile payment apps: using a smartphone applications to pay for goods and services in person (for example, Google Pay, Apple Pay, PayPal or Venmo)
- Mobile wallets: a digitized way of storing funds (for example credit cards, debit cards or store loyalty cards) Learn more about digital wallets
The combination of these payment providers mean that digital payments have become firmly embedded in our day-to-day lives. Innovations such as these mean that paying for goods, and carrying means of payment around with us, has never been faster or easier.
How is the landscape changing?
As digital payments have become more popular, businesses are starting to explore ways that they can be used to their advantage. In particular, digital payments create a virtual paper trail of data that shows who is paying for what, where and when. Financial institutions are increasingly able to analyze this information, and gain insights that can help them target customers with products that meet their needs, and help them make decisions that support their own profitability.
But just like individual consumers, businesses are coming to expect the reliability, speed and convenience of digital payments as a basic standard. This is putting new demands on payroll departments – and on payroll companies if these functions are outsourced – to ensure these payments can be easily made on a regular basis.
How are digital payments affecting the payroll sector?
The pandemic has accelerated the adoption of digital payment capability within the payroll industry; a necessary development as take-up pre-pandemic had been sluggish. Perhaps the biggest development has been the move away from BACS payments where a payment is made as a direct deposit from one account to another but could take up to 3 days and towards Faster Payments Services, enabling real-time direct deposit transfers between bank accounts, whether personal or corporate.
With the right infrastructure in place for digital payments, companies have more flexibility in their payroll. No longer do they need to pay on fixed dates to meet the deadlines set by banks: they can (within reason) run payroll when they want to whomever they want. Additionally, the removal of any need to upload files to banks or export data to them manually is a huge time-saver that frees up payroll team resource to focus on more work that adds value to the organization.
And with more opportunity to innovate, businesses can explore more creative ways to deliver payroll to their workforce. Payment services like digital wallets can be leveraged in a payroll context, where organizations pay workers into their personal digital wallets directly.
It’s clear that digital payments are here to stay, so it’s essential that payroll companies and departments stay on top of the trend. Those who do so will be best-equipped to meet employee demands, complete payment processing quicker for customers and suppliers alike, and enable much greater flexibility in how they operate day-to-day.
CloudPay’s approach to global payroll can help you take full advantage of digital payments, with a winning combination of technology and expertise. Find out how you can offer a range of digital payment types and on-demand pay to your employees with CloudPay NOW.