By Jack M. Germain
April 22, 2021, 10:25 a.m. PT
During the pandemic, the way consumers pay for their purchases has completely changed from coin scarcity and roadside operations to contactless transactions. Marketers expect the transformation to continue and expand.
The digital payments industry is maturing faster and faster. Customers will see new, more feature-rich options this year as retailers prepare for the arrival of a completely cashless society.
Merchants who had offered online purchase and collection channels (BOPIS) prior to Covid-19 saw a 70 percent increase in volume and 58 percent in value across ACI worldwide this year, according to a recent report from the real-time payment provider.
This is also a channel to watch out for scams as these benefits will appeal to scammers as well. BOPIS had a fraud attempt rate of seven percent compared to 4.6 percent for other delivery channels.
It’s not just family staples that are seeing a surge in consumer digital payment options. ACI Worldwide’s report shows a significant increase in global e-commerce transactions since the 2020 holiday season. The retail and gaming sectors lead the way in digital billing.
Transactions with dating sites have halved since the last year. Transactions in the gaming sector increased 84 percent year over year from January to December 2020. By the end of last year, retail grew by 48 percent compared to 2019.
ACI Worldwide Executive Vice President Debbie Guerra said last year the pandemic triggered the highest number of merchants to implement the BOPIS delivery channel for the first time in a year.
“We expect this channel to expand as more consumers get used to the convenience of home shopping and the speed of in-store pickups,” she said.
Consumer fear is driving cashless payment trend
In the most recent quarter, global e-commerce transactions increased 22 percent compared to the fourth quarter of 2019. This growth is not limited to just one region.
In the UK, transactions rose 28 percent. The US saw a 14 percent increase from January to December 2020 over the same period in 2019.
The CouponFollow researchers wanted to find out if people were still using cash and checks. Their report also tracked cashless payment options like digital wallets like Apple Pay and Google Pay (GPay), as well as other apps like Venmo, to see if adoption was becoming more common.
The results show that nearly half of all Americans (49 percent) are concerned about using cash because of the potential risk of Covid-19 transmission. According to Marc Mezzacca, a researcher for the report and founder of CouponFollow, 41 percent used cashless payments due to Covid-19.
“COVID-19 has definitely changed the way Americans shop, especially when they do it in person. Digital payment services like Venmo, PayPal, GPay, Apple Pay, and others show promise for future growth,” he told e-commerce Times.
The numbers confirm that many consumers are still clinging to their cash but making a greater proportion of their payments digitally. For example, 91 percent of Americans have cash with them at all times. Almost the same amount (88 percent) saves some money at home, Mezzacca added.
Over the phone, phone payments hold promise for future growth. Around 42 percent of shoppers used more apps like Venmo and PayPal last year, and 32 percent are increasingly reliant on digital wallets, he said.
Generation Payment Divide
In general, zoomers and millennials are primarily the driving force behind the rise of cashless, digital, and app-based payments, according to researchers who track how consumers pay for what they buy.
However, Baby Boomers and Gen Xers were the groups that started accelerating their adoption rates in 2020, according to CouponFollow research. Almost half (46 percent) of millennials used mobile apps such as PayPal in 2020.
However, 44 percent of millennials had already used them. So it wasn’t exactly a significant increase in adoption rates, countered Mezzacca.
On the other hand, 26 percent of Baby Boomers in 2020 used mobile apps like PayPal. That was a 5 percent jump from baby boomers who were already using digital payment apps (21 percent), he said.
Pay by phone The shopping bell rings
The use of telephone payment factors for contactless payment migration.
Mezzacca said the adoption of mobile payments has accelerated as contactless payment methods have become so important during the pandemic for obvious reasons. “But also because they’re safe and incredibly comfortable,” he added.
When consumers pay through their phone’s wallet connection, they always need to present some form of identification such as facial recognition or a fingerprint scan to enable payment. When it comes to paying in person, a majority (66 percent) of consumers use their debit cards, which are much more vulnerable to fraud than payments over the phone, he said.
“As more and more customers learn about the security benefits of mobile payments and not always have to have a wallet with them, the adoption of this technology is likely to increase,” he added.
Cashless economy on the horizon
The pandemic has accelerated the trend towards cashless and contactless payments. Mezzacca believes we are closer to living in a cashless society.
However, aside from the current health concerns of Covid, consumers largely agree on cash as it is protected from fraud. Currently, only 32 percent of shoppers can imagine foregoing cash in the future, he said.
“While contactless payments are on the rise and studies show they are more secure too, the payment methods Americans use to shop online and in person will continue to be inconsistent for the foreseeable future,” he predicted.
The investigation is clear, Mezzacca added, that contactless payments are more common and are considered reliable by American consumers.
“As consumers see the value of these technologies and the technologies improve, adoption will continue to grow,” he said.
This means that SMEs and merchants must be ready to meet the growing consumer demand for cashless / contactless payments. To do this, they have to invest in the right hardware and software.
“People are starting to have less money on them, and tech-savvy buyers are the future. Failure to meet that demand could be more costly in the long run. This will also set you apart from your competitors, so it’s worth the investment,” suggested Mezzacca before.
Meet widespread consumer expectations
SMBs and in-store merchants must meet growing consumer demand for cashless / contactless payments if they are to survive in-business.
According to Jodie Kelley, CEO of the Electronic Transactions Association (ETA), the best way for SMBs and in-business merchants to meet growing customer demand for cashless / contactless payments is to reach out to consumers wherever they are.
“Offering contactless payments is easier than many merchants think. In fact, many terminals already have the ability to offer contactless payments. The transition is a win-win. If merchants meet consumer demand for contactless payments, they will Keep customers and new customers gain those, “she told the E-Commerce Times.
Digital payment services such as Venmo, PayPal, GPay and Apple Pay are now widely used. As organizations and consumers turn to a pandemic landscape where cash is no longer the norm, the adoption of alternative payment methods such as mobile wallets and peer-to-peer (P2P) services is increasing exponentially.
“The pandemic resulted in an increase in transactions, dollar volume and the number of users of all-digital payment services, including mobile wallets and P2P services,” said Kelley.
Digital through the numbers
Global mobile payments rose to an all-time high of 46 percent in 2020, down from 40.6 percent in 2019 and 18.9 percent in 2018. The US mobile payments volume reached $ 131.36 billion in 2020 , and users hit 86.9 million – an 18.9 percent increase and a 31.6 percent jump, noted Kelley.
With P2P services like PayPal and Venmo, which have 60 million users, users can send money to each other from their mobile devices through a linked bank account or card. Mobile wallets like Apple Pay and Google Pay can be used to store cards securely.
According to a recent Chase study that looked at consumer preferences for digital banking, 30 percent of respondents signed up for P2P options in the past year. It was also found that mobile wallets attracted around 30 percent of all users in 2020.
“Mobile wallet usage will double in 2021 and grow at double-digit rates by 2024,” said Kelley.
Cell recently found that 75 percent of millennials use P2P. Of these, 49 percent use P2P at least once a week. The cell network processed a billion payments in 2020.
“We believe these trends will continue to accelerate. As consumers see the benefits of using digital services, including convenience and security, we believe that use of these services will only increase,” said Kelley.
In fact, mobile payment app usage in business is expected to reach a milestone in 2021, reaching 101.2 million for Americans 14 and older. That represents a year-over-year growth of 29 percent in 2020. The use of apps for mobile payments is now on track to surpass half of all smartphone users by 2024, she added.
A recent study by Visa found that contactless payments usage in the US has increased by 150 percent overall since March 2019. The US is now the world’s largest market for contactless cards (175 million). According to Kelley, nine of the ten largest issuers in the US offer contactless cards.
“The US has the most contactless cards in any country in the world, adding more than 80 million Visa contactless cards in the first six months of 2020 alone. Visa expects 300 million Visa contactless cards in the US by the end of 2021,” she added .