The way that people pay, whether in-store or online, has changed dramatically over the years. Gone are the times when cash paid for everything as, now, there are so many other things for consumers to consider when deciding how they use their hard-earned money such as security, hygiene, convenience, speed and much more.
Here we delve into how emerging payment methods are turning into payment solutions, and the impact of Covid-19 on digital payments.
Is cash still a payment player?
According to UK Finance, in 2019 cash payments declined by 15% and for the first time ever, over half of payments were made by card. This shows that, despite the pandemic, payment trends were already shifting to cashless or digital.
But despite decreasing year-on-year, cash payments were still the second most used payment method last year, accounting for almost a quarter of all payments made. In a Marketing Society webinar about payment methods and solutions, Chris Ford of Blackhawk Network, stated that there may well always be some sort of place for cash, despite the cash usage drop year-on-year (confirmed by the Bank of England). People like to physically see their money at some point, whether they put this straight into their bank account, transfer it to their Apple Wallet or use it to pay, it’s likely to stick around for some time. According to Forbes, the US has been much less inclined to stop using cash over recent years and the ‘death of the wallet’ prediction never quite came (before Covid-19, that is).
However, it’s important to note the huge shift in digital payments, both online and in-store, and understand how retailers can become part of the pay revolution and get on the front-foot with new and emerging payment solutions.
Contactless payments on the rise
Before the pandemic, contactless payments were slowly rising but there wasn’t a specific need for them. From Apple pay (founded in 2014), Android pay (2015) and Google Wallet (2011), people were slowly adapting to paying with their mobile phones, but, again, it wasn’t essential to adopt this. Something like a global pandemic was what would send contactless payments into acceleration.
As most stores closed, consumers had no choice but to buy online, and if they were still physically going to shop in-store (particularly during the height of the pandemic) they may have been required to pay with card or contactless rather than cash due to hygiene reasons. Some of these actions may have been relatively, or completely, new to these consumers, meaning they have learned new habits and may even enjoy them more than using cash. If this is the case, consumers are much more likely to stick to these new habits even when the option of using cash is available to them. This is reiterated in an article by Accenture, where they state that a “cashless society” message has been pushed forward due to the pandemic.
Digital payment methods may also be on the increase due to their ability to prove the identity of customers, making it easier to monitor, control and combat transactional force. This may be a particularly beneficial reason to use a digital wallet, especially during a pandemic. According to Capital Law, Google are currently piloting a voice authentication that can be used to authorise payments – similar to face and thumb recognition.
Emerging payments turning into payment solutions
Covid-19 has forced people into becoming more digital with their payments. But for those that preferred cash or were unable to adapt to the online and digital methods of payment, the main barrier was concerns around security. Spreading money across different platforms can be concerning for people, and the unknown could make them beg the question of if their money is safe.
During the pandemic, NatWest provided a payment solution for vulnerable people who couldn’t go out to the shops themselves. NatWest provided a payment card, called a “companion card”, that these people could give to a carer to go to the shop for them using contactless payment. It isn’t their bank card, it doesn’t contain their details, it is simply a card that had their cash virtually on it for them. Essentially, a gift card, but for “self-use”.
Gift cards for self-use
This idea of using gift cards for self-use is not a new one, but one that has accelerated due to the pandemic and the fear of fraud with digital payments.
According to a study explained in the Marketing Society, How we pay webinar, 30% of Americans use gift cards to pay in a retail store at least once a month due to not just concerns around fraud, but also the many unbanked Americans who cannot access a credit or debit card.
This isn’t something that is unheard of in Europe and the UK, with people in Germany using gift cards for “self-use” to avoid security concerns. There are also emerging trends particularly in groceries, with people opting for reloadable supermarket cards that allows consumers to pay for their shopping digitally without the feeling of handing over their bank card or details.
Incentives and loyalty
Another aspect of digital payment methods is the trend of incentives and loyalty. Apple and Google are the most prominent in the UK when it comes to digital and contactless payments – they are incredibly functional and convenient, but they are not necessarily adding value for the consumer. You cannot collate loyalty points or rewards for shopping with them, it is simply another way for your bank to be used through your mobile phone.
According to FinTech, there are several banks that other payment methods could take an idea or two from. From simple point-based rewards offered by Lloyds or the very popular cashback rewards for spending with Barclays, there are many ways that persuade consumers to stay loyal to a specific bank or payment method. A retailer could adopt a similar method with a membership rewards scheme when using a certain digital payment method, similar to the NatWest companion card.
Understanding your customers’ omnichannel preferences to payment
As times, and the way people are shopping, are changing, now is the perfect time to delve deep into the behaviours and preferences of your customers to understand what it is they really want. Would your customers prefer to pay with a branded, reloadable card for both self-use and gifting? Would they use a points-based system, to collate points and redeem them off certain items? Are they more likely to use buy now, pay later options such as Klarna, and is this a decision-making aspect for them when deciding where to shop? These are all crucial things to think about as consumers’ shopping habits adapt to the current climate.
If you’d like to understand more about your customer, drop us an email.
Beth O’Grady, client manager at Summit.