Consumer Trends in Digital Payments

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Nearly nine in ten Americans now use some form of digital payment, and they are using these rapidly evolving solutions in increasingly varied ways. These are among the key findings of McKinsey’s 2022 Consumer Digital Payments Survey, the seventh in an annual effort that reveals continued growth as well as more subtle shifts in consumer preferences and behavior.

While the continued integration of digital payments is hardly a surprise, how consumers are integrating the service into their financial lives provides valuable insights for vendors looking to expand or establish retail relationships. Our August survey of more than 1,800 U.S. consumers also provides new insights into behavior surrounding two prominent payment vehicles: buy now, pay later (BNPL) funding and cryptocurrency.

The digital renaissance of the wallet

Not only has digital payment penetration increased to 89% in 2022, but the share of respondents who report using two or more forms of digital payments has grown even faster, from 51% in 2021 to 62%. In-app and peer-to-peer (P2P) purchases show the greatest gains, in many cases building on the existing use of online payments (still the top digital use case, used by 69% of consumers).

More than two-thirds of Americans expect to have a digital wallet within two years, and many are likely to hold multiple wallets. Our 2022 survey found a marked increase in the share of consumers intending to use three or more digital wallets in the coming years: from 18% in 2021 to 30% in 2022. This is a noticeable change from the legacy model of carrying a single wallet. leather wallet.

When asked who they consider to be the logical provider of digital wallets, consumers of all age groups by far identify their bank, with the second being a smartphone manufacturer and/or a technology company (Figure 1) . These survey results, however, do not appear to match consumers’ descriptions of their actual behavior; respondents are much more likely to say they use digital wallets from PayPal, Apple Pay and Google Pay (on online and in-person channels) than to identify any other provider. In light of this disconnect, banks would be wise not to rely on existing customer relationships, but rather identify pathways to meet stated consumer demands.








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In terms of wallet selection criteria, consumers – again consistently across all age groups – are looking not only for payment features, but also for the integration of loyalty/rewards capabilities, as well as solutions offering a wide range of financial services and compatibility with their existing applications. Preferences for the types of financial services included (e.g., loans, credit and debit cards, and wealth management) were relatively evenly distributed, indicating a market opportunity for a financial institution capable of providing a wallet sturdy multifunctional. Early players on this front are non-banks, for example, PayPal’s wallet, with its integration of BNPL “pay later” functionality, and Block’s acquisition of Afterpay to augment its Square Cash offering.

BNPL behaviors revolve around card trends

Perhaps surprisingly, our survey found no increase since 2021 in the share of US consumers currently using BNPL services (30% in 2021 vs. 28% in 2022). However, the share of respondents saying they are interested in future use has increased from 11% in 2021 to 15% in 2022. mid-priced, including electronics and appliances, continue to lead.

Reported consumer buying behavior supports the idea that BNPL can drive incremental sales growth, consistent with 2021 results. Across all categories in 2021 and 2022, more than a quarter of users said they would have bought less or that they would not have made the purchase. if a BNPL option was not available. This impact was strongest in the category of mattresses and furniture, where the BNPL option increased sales by eight percentage points, and in the installation of solar energy, where BNPL increased sales by four points. percentage. Of those who say they would have made their purchase without the BNPL option, 57% said they would have used a credit card, while the rest cite debit cards or, a distant third, cash.

A closer look at the BNPL cohort, otherwise inclined to use credit cards, provides additional insight. We’ve categorized these survey respondents by their usage patterns: 29% say they tend to pay their balance in full every month (known as Transactors), while the remaining 71% (known as Revolvers) report having a credit card balance month over month. month. The survey sample leans far more toward guns than the general US population, with striking behavioral differences between the two cohorts. Three-quarters of Transactors say they generally opt for the generally interest-free “pay in 4” repayment schedule (as opposed to longer terms, which often involve interest charges), while only two-fifths of Revolvers opt for the “pay in 4” (Part 2). This implies that Transactors, who are used to avoiding interest charges on their credit card balances, also prefer interest-free BNPL products. Additionally, Revolvers more often indicate that they intend to increase their use of BNPL.








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Relative stability during the crypto winter

The decline in cryptocurrency values ​​since last November’s high corresponded to a halt in the meteoric rise in crypto ownership, which more than tripled from 2020 to 2021. Crypto penetration remained stable in 2022, in terms of beneficial ownership (15%, which represents a slight increase) and those who express an interest in owning (14%).

Of the roughly two-thirds of survey respondents who express no interest in crypto ownership, their expressed objections differ from responses in our previous surveys. A growing share (39%) cites volatility as a barrier. Trust factors, both in terms of technology and counterparties, are also mentioned more frequently. Additionally, more respondents than last year cite concerns about the long-term viability of crypto and the lack of a support channel in case something goes wrong.

Of those who own crypto, nearly three-fifths hold less than 5% of their savings in these assets. At the other end of the spectrum, less than one in six respondents have committed more than 20% of their savings, and only 4% have more than half of their savings in crypto.

As economic conditions change, consumers’ spending habits and the payment channels they use tend to evolve. Today, perhaps because of general economic uncertainty; some stated consumer preferences appear to contradict market data. However, for digital payment providers, the survey results provide clear benchmarks for creating an engaging digital product for consumers.

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