Future of Payments

Let's consider the future of payments, both domestically and internationally.

The trend towards digital payments is undeniable. While cash and physical checks remain in use, their prevalence is expected to decline over time.

Federal Reserve data indicates significant shifts in US payment trends. In 2000, checks were dominant in terms of value and transaction volume. By 2012, ACH credits surpassed checks in value, and in 2007, non-prepaid debit cards led in transaction volume. Currently, ACH and non-prepaid debit cards remain the leaders in value and transaction volume, respectively.

Mobile wallet payments now exceed check payments in transaction volume and continue to grow, as do peer-to-peer (P2P) money transfers.

What will the payment landscape look like in 5, 10, or 25 years?

Mobile wallets, P2P transfers, and real-time transfers are projected to expand. ACH growth, however, is likely nearing its peak, with widespread adoption for payroll and bill payments. Credit cards will maintain their position, while debit card transactions are expected to increase due to younger generations' preferences regarding debt.

Checks and wire transfers will likely see further declines, replaced by digital wallets, P2P transfers, stablecoins, cryptocurrencies, and emerging UCC-12 payment instruments (or equivalents) such as Controllable Payment Instruments (CPIs), Digital Negotiable Instruments (DNIs), and Digital Drafts (DDs).

These trends apply to both domestic and international payments.

For enterprise payments, both stablecoins and Controllable Payment Instruments (CPIs) under UCC-12 demonstrate significant potential. Within the next five years, I foresee substantial growth in the adoption of both stablecoins and UCC-12 CPIs for business transactions. In the longer term, CPIs may offer greater advantages due to their enhanced suitability for regulated businesses compared to stablecoins. CPIs provide benefits over traditional checks and wire transfers and can be classified as cash equivalents on a balance sheet

A future discussion will explore the comparison between stablecoins and UCC-12 payment instruments.