Consumer Payment Trends: 4 Things We’re Seeing Now
In the aftermath of the pandemic, against a backdrop of increasing cost of living, people’s payment habits continue to evolve - along with their expectations for the future of the checkout. In April this year, Paysafe interviewed 11,000 consumers in 10 countries across Europe and the Americas to better understand the key consumer payment trends we are seeing today. Here are the top four findings from that research.
1. Customers want better money management
Many households are taking a more cautious approach to spending due to soaring prices, causing consumers to reconsider their choice of payment methods. 44% of respondents have changed their habits as a direct result of the rising cost of living, the majority of whom are searching for options that enable them to track their spending more accurately.
Debit cards were the most preferred online payment method for those who had changed their payment habits, with 59% of respondents paying via debit card in the month leading up to taking our survey — a 5% increase since 2021. Digital wallet use has also experienced a surge - perhaps, in part, thanks to their money management features, with two-fifths (41%) using them more than they did a year ago. Interestingly, 16% of those who changed their payment methods are paying with crypto more frequently.
On the other hand, credit-based payments are trending downwards, except for credit cards which remain the second most popular online payment method (51%) behind debit cards. They're also the preferred way to pay for big-ticket purchases including long-haul flights, holidays and household appliances.
2. Cash is turning digital
Although the majority of consumers (52%) are using cash less often, it still makes up almost a third (31%) of in-person transactions. Respondents still hold cash in high regard, with 59% viewing it as the most reliable payment method and 70% stating they would be concerned if they couldn’t access it.
As well as remaining a popular choice for in-store payments, cash is also establishing itself as a prominent online payment method, suggesting it is here for the long haul.
In the last year, eCash payments — online transactions paid in cash — have increased. And in further good news for the traditional payment method, 47% of respondents would prefer to make online purchases in cash, and 44% would buy online more often if they could pay in cash.
Although our research didn’t focus on the reasons behind this trend, we imagine the cost-of-living crisis is likely a factor. 26% of those who have changed their payment habits due to inflation are using eCash more often, a method that would enable them to monitor their online spending more closely.
Another benefit of eCash for the increasingly tech-savvy consumer is that it can protect against online fraud by acting as an added layer of security. Consumers can make online payments without sharing any sensitive financial details.
3. Security is a top priority, but not at the cost of experience
For 44% of respondents, security is the main concern when paying online and, if it’s not addressed upfront, this is a barrier to the first transaction for consumers. 70% don’t feel comfortable sharing their financial details online, and 62% would worry if they weren't asked for any security information before completing payment.
44% are happy with the current balance between security and convenience when making online payments, and 23% would only accept additional security measures if the inconvenience were minimal. This suggests that any advancements to security at the checkout must not interfere with a convenient consumer experience as the balance is key for customers.
4. A golden opportunity in embedded payments
Embedded payments are one of the hottest fintech trends. Our research confirms its untapped potential, and although consumer awareness remains low - 49% haven’t heard of the term embedded payments - many have likely used the technology unknowingly.
31% can see themselves using embedded payments within the next two years if the technology becomes more widely available and they learn more about it. The 51% who have heard of the term also feel upbeat about the future of embedded payments, with the majority believing they’re safer than traditional payments.
Given consumers' reduced appetite for risk and their unwillingness to accept more friction, embedded payments represent a huge opportunity for merchants. And with some education on the benefits of adopting the technology— particularly how it can satisfy consumers’ desire for a balance between security and convenience, it could be a win-win. For merchants, it could build a promising revenue stream, whilst boosting trust and increasing loyalty amongst consumers.
What does the future hold?
Inflation looks set to continue rising, which means in turn consumers will likely become even more selective with their spending, particularly online. At the same time, they'll also continue expecting to pay securely with a frictionless checkout experience.
For merchants, offering a variety of payment methods at the checkout continues to be a priority, and if there were any question marks over cash, the impact of the rising cost of living has established it as a must. Customers want more flexibility and control so appealing to this with a broad selection of payment methods will be key.
One more complex consideration for merchants is how they build relationships with consumers by engaging and educating them on new technologies. For example, embedded payments increase security and are more convenient for consumers, however ongoing education about the benefits can only be a good thing to drive mass adoption.
Read the full Lost In Transaction report: Consumer payment trends 2022: Navigating online payments in the age of uncertainty.
About the author: Chirag Patel is the CEO of Digital Wallets at Paysafe.