Digital payments: What they are & how they work (2026)

Key Takeaways:

• Digital payments let you send and receive money electronically, without cash or paper cheques, using cards, digital wallets, bank transfers, or QR codes.

• Singapore businesses are shifting toward faster, more secure payment rails as regulators phase out older methods like corporate cheques.

• Airwallex Payments lets you accept payments in 130+ countries, via 160+ local payment methods.

Digital payments are transactions where money moves electronically between a payer and a payee, without physical cash changing hands.

For businesses, digital payments aren't just a convenience. They affect how fast you get paid, how much you pay in fees, and how easily you can serve customers who expect instant, borderless payment options.

This guide breaks down how digital payments work, the main types you'll encounter in Singapore, and what's changing in 2026 as regulators and payment providers push toward faster, more secure systems.

How do digital payments work?

Every digital payment moves through the same basic steps, whether it's a customer tapping a card or a business paying an overseas supplier. Understanding these steps helps you spot where delays or fees can creep in.

1. Initiation

The payer starts the transaction by tapping a card, scanning a QR code, or entering bank details online. This step captures the payment amount and the payee's information.

2. Authentication

The payment system confirms the payer is who they claim to be. This might mean entering a PIN, using biometric verification like a fingerprint, or approving a one-time password sent to your phone.

3. Authorization

The payer's bank or card issuer checks whether the funds are available and approves or declines the transaction. This happens almost instantly for card payments and slightly slower for bank transfers.

4. Settlement

Money moves from the payer's account to the payee's account. Card payments often show as "pending" for a day or two before funds settle, while real-time payment rails like PayNow settle within seconds.

Digital payments vs. traditional payments

Traditional payments (cash and paper cheques) still work, but they come with trade-offs that digital payments solve for most businesses.

Types of digital payments

Businesses in Singapore now accept and make payments through several different methods. Each one suits different situations, so most businesses end up using a mix rather than relying on just one.

Contactless card payments

You tap or wave a card near a payment terminal, and the transaction goes through using near-field communication (NFC) technology. This works for in-person purchases and is processed through card networks like Visa, Mastercard, American Express, and UnionPay.

Digital wallets

Digital wallets store your card or bank details on your phone or another device, so you can pay by tapping your device instead of a physical card.

Apps like Apple Pay, Google Pay, and GrabPay fall into this category, and they use the same underlying card networks as contactless cards.

QR code payments

You scan a QR code with your banking or payment app to complete a transaction. PayNow is the most common example in Singapore, linking directly to a person's or business's bank account or mobile number, so payments settle without needing card details at all.

Bank transfers

You send money directly from one bank account to another, either through GIRO for recurring payments or FAST for one-off transfers. Bank transfers work well for supplier payments, payroll, and other transactions where both parties already have Singapore bank accounts.

Buy now, pay later (BNPL)

BNPL lets customers split a purchase into smaller instalments, usually interest-free if paid on time. For businesses, offering BNPL at checkout can make larger purchases more accessible to customers, though it typically involves a fee paid to the BNPL provider.

Choosing the right mix of payment methods depends on what your business sells and who your customers are. If you're comparing providers to help you decide, our guide to digital payment solutions in Singapore walks through the options in more depth.

Looking ahead: What's changing in digital payments

Singapore's shift toward electronic payments keeps accelerating, and two regulatory developments show where things are headed next.

Corporate cheques are being phased out, just on a longer timeline than first planned.

The Monetary Authority of Singapore (MAS) extended the deadline to stop processing corporate cheques to 31 December 2026¹, giving businesses more time to shift to Electronic Deferred Payment (EDP) and EDP+, two e-payment solutions that launched in mid-2025 to handle post-dated payments and time-sensitive transactions.

MAS is also looking at upgrading PayNow itself. In June 2026, MAS and the Association of Banks in Singapore launched a study covering four areas of enhancement¹ for Singapore's instant payments infrastructure: a sign that even established digital payment rails keep evolving.

Why adoption patterns matter for your business

Singapore consumers already lean towards digital payment methods. A Xero survey found that 76% of Singapore consumers use credit or debit cards, while 55% use PayNow and another 55% use bank transfers².

Gen Z shows the strongest preference for PayNow, with 68% naming it their preferred method². Close to a third of Singapore consumers (30%) say they carry only their phone, not a wallet, when shopping².

This matters because payment gaps cost you sales. In an Airwallex survey of cross-border shoppers, 77% of consumers said they'd likely abandon their cart if their preferred payment method wasn't available³.

Offering the payment methods your customers actually want to use is a direct driver of conversion, not a nice-to-have.

Why Singapore businesses choose Airwallex for digital payments

Traditional banks weren't built for how businesses pay and get paid today. Airwallex gives you a faster, more flexible alternative designed specifically for digital-first payment flows.

Here’s what you can do with Airwallex:

Accept payments the way your customers want to pay

You can accept payments through 160+ local and global payment methods, including cards, digital wallets, and bank transfers, across 130+ currencies.

This means you're not limited to card-only checkouts: you can offer PayNow, GrabPay, Alipay, and other methods your customers already trust, all through a single integration.

Settle funds without unnecessary conversion costs

When a customer pays you in a currency you also hold, you can settle and spend those funds without forcing a conversion. This helps you avoid the extra fees that come with converting every payment back into a single home currency.

Manage payments and payouts from one place

Once funds land in your Airwallex account, you can pay suppliers, run payroll, or issue corporate cards from the same platform, without needing a separate banking relationship for each currency or market.

Frequently asked questions (FAQs)

What's the difference between digital payments and electronic payments?

The terms overlap, but digital payments are a subset of electronic payments. Electronic payments cover any non-cash transaction, including things like card swipes at a physical terminal that don't need an internet connection. Digital payments specifically rely on internet-connected devices and platforms, like mobile wallets, apps, and online banking.

Is PayNow considered a digital payment?

Yes. PayNow is a digital payment method that lets you transfer money using a mobile number, NRIC, or UEN instead of a bank account number. It settles through Singapore's banking network in real time, making it one of the fastest digital payment options available to businesses here.

Are digital payments safe for business transactions?

Yes, digital payments are generally considered safer than cash or cheques for businesses. They use encryption, tokenization, and authentication methods that make transactions harder to intercept or forge, and every transaction creates a digital record you can use for reconciliation or dispute resolution. Cash offers no such trail once it changes hands.

Do digital payments cost more than cash or cheques?

Not necessarily; it depends on the payment method and provider you use. Card payments typically involve processing fees charged by the payment provider, while bank transfers like PayNow or GIRO often cost little to nothing per transaction. Cash and cheques carry their own hidden costs too, including staff time for handling, deposits, and reconciliation.

Can a digital payment be reversed if there's a mistake?

It depends on the payment method and how quickly you act. Card payments usually go through a formal chargeback or dispute process with your provider, while direct bank transfers like PayNow can be harder to reverse once completed, since funds move instantly. Always double-check payment details before confirming a transfer.

What does a business need to start accepting digital payments?

At minimum, you need a business bank account and a way to process transactions, such as a payment gateway, POS terminal, or payment links. Providers like Airwallex let you set this up without a traditional bank relationship, giving you access to multiple payment methods through one account.

Sources: 

1. www.mas.gov.sg/news/media-releases/2024/mas-and-abs-announce-launch-of-edp-solutions-in-mid-2025

2. www.xero.com/us/media-releases/digital-payment-trends-singapore-gen-z-leading-shift/

3. www.airwallex.com/global/newsroom/cross-border-ecommerce-2024-report