Snippet: Consumer preference for digital payments has risen at an exponential rate since 2020 and will continue rising beyond 2022. Here’s why.

Consumer preference for digital payments has risen at an exponential rate since 2020 and will continue rising beyond 2022. Here's why.

The shift to contactless and digital payments was a trend long before the COVID-19 pandemic. 

However, the pandemic expedited the process for many businesses, as they were forced to move to an e-commerce operation. 

For Millennials and Gen Z (aka Zoomers), the convenience of peer-to-peer (P2P) apps like Venmo and PayPal were already quickly becoming standard. But Covid-19 saw a surge in P2P usage among all generations, as 79% of consumers say they've used these services either through their financial institution or third-party apps (like Venmo). This rise in consumer preference for digital payments has forced vendors to update their online shopping procedures to be as safe and manageable as in-person transactions, if not more so. 

One can cite the 2020 coin shortage as the bluntest example of a society adapting to the cashless age. Consumers and their coins stayed home when the government put lockdown orders in place. If you were still relying on coin-op laundry in your apartment complex, you probably remember the struggle, as well as the signs asking for exact change or cashless transactions. 

Digital payment trends grew through 2020 and will continue through 2021, 2022, and well into the future. With QR codes, biometrics, and two-factor authentication (2FA), those hesitant to switch to cashless payments for security purposes can rest assured knowing their digital wallets are well protected. 

The boom in consumer digital payments 

While the e-commerce market was already experiencing modest but steady year-on-year (YOY) growth, the health and mobility concerns of the early pandemic kicked it into overdrive. With safety being the primary concern, contactless payments like tap-to-pay became a make-or-break stipulation for consumers. 

According to VISA's 2020 Back to Business Survey, 48% of consumers wouldn't stop at a store that didn't offer contactless payment. Sixty-three percent of shoppers would even switch to a new business offering contactless payments if their old business didn't keep up with consumer digital trends. 

The last thing anybody wants, especially amidst an ongoing pandemic, is to lose customers. Forty-six percent of small business owners stated that one of their biggest reopening concerns was attracting new customers. Accordingly, small business owners may consider adopting new means of digital payments to attract consumers looking for a safer way to pay. 

As consumers get more and more comfortable shopping online, e-commerce only continues to grow. In 2019, e-commerce controlled 14% of the global retail trade. In 2020, that number rose to 17%, accounting for $5.4 trillion in value. A Research and Market survey attributes the rise to 50% of consumers using digital payments more than they did pre-pandemic. New digital payment methods from top financial companies will continue to roll out as these trends continue. 

According to the Mastercard 2021 New Payments Index, 93% of people would consider using emerging digital payments methods. Such methods include cryptocurrencies, biometrics, and scannable QR codes.  

The pandemic certainly played its part, with two-thirds of consumers saying they used new digital payment methods they wouldn't have otherwise tried under normal circumstances. 

In short, one would not be wrong to identify the pandemic as a catalyst for the growth of digital payments. The majority of consumers who claimed to be making more digital payments said they'd continue doing so post-pandemic. 

It takes between 18 and 254 days to form a habit. With the pandemic approaching two years (or 730 days), cashless payments have now become deeply ingrained in the average global consumer. 

Are consumer digital payments here to stay? 

Experts say the digital payments industry will hit $10.5 trillion in value by 2025. Big tech companies like Apple, Google, and Samsung have already capitalized on the trend, offering several contactless ways to pay. Your Apple Watch or mobile device can hover over the card reader and make payments via Near-Field Communication (NFC) technology. 

COVID-19 highlighted the physical safety of digital payments, but it also opened our eyes to their sheer convenience. Bankers, for instance, noticed a drastic change in their customers' behavior as they embraced online banking as the new normal.  

The ability to scan and deposit checks, transfer money between accounts, and send and receive money via unified payments interface (UPI) eliminated reasons to deposit or withdraw cash from the bank.  

August 2021 also saw a 33% increase in credit card usage compared to August 2020. Whether it's in-person or online, the shift to digital payments isn't going anywhere. 

What do digital payments mean for your customers? 

It's clear how going cashless appeals to your customers from a health perspective. But how does an increase in digital payments help (or hurt) your customers? 

For starters, cash is a physical item, susceptible to human error and—in the worst-case—theft. Running a fully digital operation accounts for every penny that moves through your customer’s business. Your customers don't have to train their employees on the registers or teach them how to count the drawer at the end of the day. 

However, more digital payments does mean more processing fees paid per transaction. Major credit card companies (VISA, Mastercard, Discover, AMEX) charge between 1-3% per transaction. Your customers will need to weigh the cost of processing fees against the increase in their expenses and decide if going cashless is the right move financially. For example, a metropolitan business may benefit from going cashless more than a rural or blue-collar business. 

Going cashless means better security for your customers. E-wallets are locked behind passwords, biometrics, and 2FA verification, so would-be robbers can’t make off with anything of real value. Furthermore, a cashless operation runs like a well-oiled machine, keeping a steady flow of revenue moving through their business. 

Digital payment solutions from Entersekt 

The age of digital payments is still in its infancy.  

To stay relevant in this competitive world, your customers must adapt to trends, offering more cashless and contactless means of payment. Security and user experience are the two most significant concerns when it comes to these, and it helps to have a fintech partner like Entersekt who can help you navigate this terrain. 

As a leading fintech provider, Entersekt can help move your customers into the digital world. Whether it’s customer authentication3-D SecureQR paymentsdigital identity, or more, Entersekt has a solution for you. 

Learn more about how Entersekt can help you set your customers up to embrace the future of digital payments head-on. 

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Entersekt editor

Entersekt editor

An avid consumer of anything to do with tech, Editor (or Ed, for short) treats every piece of writing that crosses his desk as if it were his own. Fluent in nine languages, Ed’s skills are in high demand at Entersekt. When he’s not perfecting his colleagues’ work by day, he can be found blogging in his personal capacity at night.

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Entersekt is an innovator of customer-centric fintech solutions. Financial services providers and other enterprises rely on our patented mobile identity system to provide both security and the best in convenient new digital experiences to their customers, irrespective of the service channel. With us, they can concentrate on their innovation roadmap, while delivering intuitive, low-friction digital experiences to their customers.