McKinsey & Company, a US management consulting firm, has conducted its annual Digital Payments Consumer Survey to document the adoption of digital wallets and mobile payments by US consumers. Their 2020 study clearly shows the immense impact that COVID-19 has had on digital payment trends and a radical shift in consumer buying behavior.
It was discovered that three-quarters of American consumers use a certain type of digital payment. This can include: in-store checkout by way of a mobile phone/QR code, in-app and browser-based online purchases, and person-to-person payments. Although the widespread use of digital payments reached 78% in 2020, the more recent growth has been gradual. Clearly, this shows that there exists a strong barrier to convince the remaining group.
Important gains have been cited, in that the portion of consumers using two or more digital payment methods, there was a leap from 45% last year to 58% in 2020. This more profound level of “digital engagement” largely stems from “pandemic-related behavior”.
The most common forms of digital payments, in-app and online, were used by 57% and 53% of consumers respectively. On a related note, more than 50% of US consumers reported shifting their purchases from brick-and-mortar establishments to the online platform since the outbreak of the pandemic.
In addition, more than 33% plan to increase their use of online shopping in the upcoming six months. Conversely, only 11% plan to go back to shop and brick-and-mortar stores.
Major Hurdles With Adoption
A source of concern that could inhibit widespread adoption of digital payments comes from the decreasing levels of trust that consumers have towards digital payments. A growing number of consumers are having, “a deteriorating perception of digital payments security” at 15%.
Despite payment giants like PayPal and Amazon scooping up consumer trust at the same level of banks and other network providers, the numbers tell a different story. The data is revealing that consumers are having growing concerns with any payment made using social apps and “Internet of Things” devices.
Consumers have demonstrated greater comfort with the use of contactless debit and credit cards. Contactless cards have been struggling to gain traction in the US pre-COVID-19. Now, since the outbreak and consumers having a heightened sense of concern for their health, they have taken to using contactless cards with little resistance.
Another finding was that, although one third of consumers were well aware of contactless technology, they were mostly uninterested in it. Their reasons were “lack of incremental value” and security. However, most experts would agree that contactless payments are safer than swiped or inserted EMV cards. It is clear that more assertive campaigns that communicate these advantages are in order.
With customers still concerned about contracting the virus, many opt not to do their shopping in-store. This is where retailers must accommodate their customers to ensure that they are offering as many payment options as possible. Not doing so could jeopardize the retailer’s bottom line.
In order to minimize contact for brick-and-mortar purchases, some solutions can include using QR codes or NFC to reduce checkout lines, removing the counter checkout procedure completely, and curbside pickup.
For card providers, the pandemic has brought a halt to most travel and that means that travel rewards would not be as appealing. Issuers can also work towards launching campaigns aimed at tackling security concerns surrounding contactless cards. Communication programs that improve the value perception can also be beneficial.
The Bottom Line
Although the digital adoption of payments continues to grow, consumer trust has diminished slightly. As a result of the pandemic, many consumers have turned to digital payments to meet their needs. However, it is unclear if all these radical shifts in consumer shopping behavior will remain permanent.