Consumers from around the world are increasingly favoring digital payments over cash, fueling a surge in cashless transactions. A new report by Capgemini Research Institute reveals that non-cash transaction volumes worldwide reached 1,411.3 billion in 2023, up 17% from 1,202.8 billion in 2022.

Even established regions like Europe experienced significant growth, with non-cash transactions rising by 15.6% between 2022 and 2023 to reach 361.1 billion.

The World Payments Report 2025, released on September 10, forecasts sustained growth in cashless transactions. Global digital payments are expected to rise at a compound annual growth rate (CAGR) of 15% from 2023 to 2028, reaching a total of 2,838 billion transactions. In Europe, cashless payments are set to grow by a CAGR of 12% over the same period and reach 637.1 billion.

A heterogeneous region

In Europe, cashless transactions are primarily composed of card transactions, credit transfers and direct debit, which accounted for 66%, 17% and 8% of non-cash transactions in 2023, respectively.

However, the report notes that the landscape is evolving as consumers increasingly adopt alternative payment methods like instant payments and e-money, including digital wallets. The pan-European instant payment scheme, SEPA Instant Credit Transfer (SCT Instant), was launched in 2017 and by Q1 2024, 17.3% of all SEPA credit transfers were instant, the report says. Instant payments made up 4% of payment transactions in 2023, while digital wallets accounted for 5% of payment transactions, data from the report show.

Despite SEPA harmonization efforts, the European payments landscape remains fragmented with nearly 30 retail payment systems active in the eurozone as of H1 2023.

Furthermore, customer preferences vary greatly across countries. In Germany and the Netherlands, users tend to favor bank transfers such as iDeal in the Netherlands, while in France, customers prefer local card schemes. Mobile wallets, such as the unicorn Satispay in Italy or Bizum in Spain, are gaining popularity and adoption.

Banking consortium launches digital wallet Wero

To address Europe’s fragmented payment landscape, the European Payments Initiative (EPI) started rolling out this year Wero, a new mobile wallet. Leveraging SCT Inst, Wero enables instant payments across the eurozone, aiming to simplify digital payments and promote the EU’s strategic financial autonomy.

Wero allows users to send and receive money instantly using phone numbers, QR codes, or email addresses. Initially focused on person-to-person payments using phone numbers, QR codes, or email, Wero plans to expand by 2025 to support payments for small businesses, online merchants, and recurring bills, with in-store payments and additional features arriving by 2026.

Industry observers say Wero will offer European banks a competitive alternative to bigtech wallets like Apple Pay and Google Pay, enhancing their ability to compete in the digital payments market. The solution will also streamline Europe’s diverse payment systems under one brand, improving user experience and fostering cohesion across the continent.

Wero was launched in Germany and Belgium in July. France will follow this autumn, with the Netherlands and Luxembourg joining later in 2024.

EPI is an initiative launched in 2021 by 16 European banks and financial services institutions. These institutions include BBVA, BNP Paribas, Groupe BPCE, Deutsche Bank and ING. EPI’s members currently represent more than 70% of retail banking customers in Belgium, France, and Germany.

Government initiatives fuel the rise of cashless transactions

In Europe, the rise of cashless payments has largely been driven by government policies designed to create a more connected financial ecosystem in Europe.

One key initiative for 2024 is the One-Leg-Out (OLO) Instant Credit Transfer (OCT Inst) service. Launched by the European Payments Council in November 2023, OCT Inst is a cross-currency payment system designed for processing international instant credit transfers between accounts. The service aims to speed up international payments, increase cost transparency, and improve payment traceability.

2024 also saw the launch of the Instant Payment Regulation (IPR). The regulation, which entered into force in April 2024, mandates that all eurozone payment providers must be able to receive instant payments by January 2025 and send them by October 2025. Non-eurozone markets have until 2027 to comply. Any fees for these instant payments must be the same as or lower than those for standard credit transfers. The IPR aims to ensure instant payment availability, standardization, fair pricing, and enhanced security across Europe.

Another key initiative is the Payment Service Directive 2 (PSD2). Introduced in 2018, PSD2 marked a pivotal regulatory step by mandating consent-driven access to payment and account data for third-party providers, laying the groundwork for open banking.

Open banking boosts cashless payments by allowing banks to securely share customer information with other financial services. This fosters innovation and competition in payment solutions, creating more options for easy and secure payments.

The European Union (EU) is now overhauling PSD2 with the Payment Services Directive 3 (PSD3). This directive, slated for publication in late 2024 or early 2025, will introduce more stringent customer authentication rules and tighten control over access to payment systems and account information.

Complementing PSD3, the commission also proposed a regulation on a framework for financial data access (FIDA) in June 2023. This initiative seeks to promote open finance and data-driven financial services by granting consumers greater control over their financial data.

Digital B2B transactions on the rise

Besides retail payments, business-to-business (B2B) payments are also in the midst of a digital revolution, driven by widespread digitalization among companies and fintech innovations catering to both small businesses and large corporations.

This surge is further being propelled by the explosive growth of B2B online marketplaces. In 2023, there were nearly 750 online marketplaces globally, and projections for 2025 exceed 1,000, the report says.

In 2023, B2B non-cash payment transactions totaled 51.6 billion in Europe, up from 46.5 billion in 2022. This trend is expected to continue with a 10.8% year-over-year increase in 2024 and an 11.4% CAGR from 2023 to 2028. By 2028, Europe is projected to become the largest market for B2B non-cash payments, representing 32.3% of global transactions with an estimated 89.9 billion transactions.

Featured image credit: edited from freepik