Published by Jessica Weisman-Pitts
Posted on November 10, 2021
6 min readLast updated: January 28, 2026
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Payments 4.X redefines digital payments, emphasizing seamless experiences and embedded finance, accelerated by COVID-19.
By Jeroen Hölscher, Global Head Payments Practice and Elias Ghanem, Global Head Market Intelligence, Capgemini │Financial Services
The evolving digital appetite from both retail and B2B customers is redefining payments engagement. Capgemini’s World Payments Report 2021 revealed that while consumers and commercial clients have long sought digital payment experiences matching the expediency of other services, COVID-19 catalysed payments providers to act urgently to offer secure, convenient, frictionless omnichannel solutions and improve customer experience (CX).
The pandemic accelerated decisions about simplifying and securing virtual payments acceptance for both large corporations and small-to-medium enterprises (SMEs), which represent the very large portion (99%) of all EU businesses.[1] Before the crisis, banks and payments service providers (PSPs) targeted corporate connectivity and treasury management solutions to large corporate clients. Now, many SMEs embrace a digital-first mindset.
The pandemic fast-tracked the already ongoing payment industry transformation to become embedded, immersive, and finally invisible. Embedded pay, rooted in various lifestyle products and offerings, enables a convenient and personalized experience for consumers. This CX-centric approach heralds what we call the Payments 4.X era.
Experience is the defining feature of Payments 4.X. Driven by customers’ desire for seamless, frictionless experiences, the development of super apps started to appear to help consumers and small businesses combine daily-life needs or various business functions into a single application. Now, merchants can embed online and in-store payments within the shopping experience to eliminate checkout pain points. The results? A direct impact on the famous “conversion rate” where shoppers will complete a transaction through positive CX and increase their brand loyalty.
As more banks and PSPs share infrastructure and data via platforms, payments become an embedded, invisible, enabling function within a collaborative environment that boosts customer experience. Embedded payments can take on many forms − from Starbucks offering an integrated wallet and payments within its app, to Uber offering to finance their drivers’ cars. In addition, payments costs go down as data digitalization empowers banks to understand and serve customers and manage risk. Creating a win-win value exchange will be critical as network effects become high-impact success factors for banks and PSPs.[3]
Buy-now-pay-later (BNPL) has been making gradual inroads since the mid-2010s in revolving credit. And it became more popular during the pandemic, especially among younger generations and new-to-credit populations. Capgemini World Payments Report 2021 found that Gen Z (born after 1996) are ditching credit cards for user-friendly, budget-focused alternatives, with BNPL topping the list. In fact, around 75% of consumers aged 30 and below told us that they use credit cards less than 20 times a year, but are keen to explore BNPL.
In Europe, BNPL compound annual growth from 2020-24 is expected to nearly double and account for 13.6% of the region’s e-commerce spend.[4] As a result, payment firms are equipping themselves with BNPL capabilities to help drive sales for e-commerce platforms and retailers’ in-store checkouts. Nearly 20% of our survey participants said they use BNPL solutions, and we expect the number to jump to 60% within two years.
Invisible payments significantly affect retail checkouts and may even edge out cash, cards, and wearables in the traditional payments journey – creating a convenient and speedy experience. Firms are offering Invisible Pay services by collaborating with FinTechs, third parties, and other stakeholders, with some bank services standardised. Invisibility shifts the focus of payments as a product to payments as a tool for customer reach and engagement. More than 30% of consumers face significant online and in-store checkout hurdles, and invisible payments offer a frictionless experience.
Biometrics radically simplify proximity payments, increase security, and provider greater user convenience. Not surprisingly, contactless biometric card implementation is inching upward. Beyond active authentication payments, passive authentication uses behavioural patterns and other contextual biometric signals to tighten security.
Cryptocurrency payments are becoming popular among some businesses, although widespread adoption is embryonic. Today there are +11,000 cryptocurrencies and more than 400 cryptocurrency exchanges. Companies including PayPal, AT&T, Overstock.com, and Travala.com accept leading crypto payments.[5] The cryptocurrency market is volatile, yet crypto-linked cards sponsored by global card player initiatives are building a fertile crypto-payments ecosystem. The future lies into the Central Bank Digital currencies (CBDC) initiatives, as several countries announced pilots into this yet-to-mature arena.Even as alternative payments gain popularity, consumers still want better experiences
Even as alternative payments gain popularity, consumers still want better
Sources: Capgemini Financial Services Analysis, 2021; World Payments Report 2021 Voice of Customer survey, N=6,300.
Digital payments have changed customer engagement forever
COVID-19 catalysed digital payments across transaction types, age groups, and markets. Vocal consumers helped spark the new Payments 4.X era in addition to the growing B2B2C requirements for instant confirmation, smooth reconciliations, seamless cross-border transactions, and failsafe security.
To capitalize on the momentum, we encourage payments players to collaborate with nimble PayTechs and synergistic ecosystem partners to craft solutions based on customer experience, not products.
Now is the time to set a plan in motion to leverage data, build digital prowess, focus on customer engagement, and nurture collaborative synergies within the ever-expanding payments ecosystem.
For further insights about the future of payments and Payments 4.X solutions, download a free copy of Capgemini’s World Payments Report 2021 or contact the Europe-based authors via social media: Jeroen Hölscher or Elias Ghanem.
The article discusses Payments 4.X and how it redefines digital payments through enhanced customer experiences and embedded finance.
COVID-19 accelerated the adoption of digital payments, pushing providers to offer secure and convenient solutions.
Next-gen payments include buy-now-pay-later, invisible payments, biometric payments, and cryptocurrency.
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