It’s all in the numbers. While it will be at least a few more years before a cashless society becomes a reality, data insights clearly indicate that we have embarked on that path. What’s more—and not surprisingly—other factors are having and will continue to have an impact on consumer spending habits and behaviors. E-Complish takes a detailed look at how the “figures” add up.
Going Cashless in the U.S.—and Around the World
Digital payments are fast gaining ground in the U.S. According to annual payments research conducted by McKinsey & Company, more than three-quarters of Americans use some form of digital payment, and “penetration of digital payments reached 78 percent in 2020.” McKinsey’s most recent research points to significant increases in the share of consumers using two or more digital payment methods, which jumped from 45 percent in 2019 to 58 percent in 2020. The two most common forms of digital payments are in-app (57 percent of consumers) and online (53 percent of consumers).
Of course, the U.S. isn’t the only nation that is moving away from cash in any significant way. According to Global Data, Finland ranks among the top five countries in the world for e-commerce spending as a percentage of the gross domestic product (GDP), Internet banking usage, and smartphone usage. In South Korea, six percent of the entire GDP is now taken through e-commerce spending, and the average credit card is used for more than 100 transactions each year. Half of the nation’s 1,600 bank branches no longer accept cash deposits or withdrawals.
In the U.K., Global Data’s research indicates, almost all citizens have made an online payment of some type, while in Australia, Internet banking is forecast to be the norm for up to 70 percent of the nation’s citizens by 2022. All Australians are expected to have at least one mobile phone by 2022 as well, and new laws introduced this year are expected to make digital payments mainstream across the entire country. And then, there is China, where e-commerce spending is expected to comprise as much as 11.6 percent of the GDP by 2022. As of 2019, Chinese citizens had completed 80 billion digital transactions.
Meanwhile, it is important to note that of consumers polled for Mastercard’s New Payment Index, 59 percent said they are no longer willing to patronize businesses that only accept cash payments. For more on the move to digital payments, see E-Complish’s recent blog on the case for new payment solutions.
Changing Spending Habits
Statistics clearly indicate that COVID-19 has changed consumer spending habits and behaviors. For instance, a study by McKinsey & Company revealed that in the U.S., the pandemic has spurred consumers to spend 1% to 14% less on alcohol, snacks, and tobacco as well as 15 percent to 29 percent less on restaurants dining. U.S. consumers also plan to spend 30 percent to 49 percent less on footwear, jewelry, electronic accessories, hotel and resort stays, and furnishings and appliances, according to the study. Seventy-three percent of consumers queried for the study said they have tried new brands during the pandemic and have no plans to stop doing so going forward.
Additionally, according to McKinsey’s research, the pandemic has sparked a marked increase in online spending. Online spending on household supplies has risen by more than 50 percent; on accessories, skincare, and over-the-counter medicine, by 30 percent to 49 percent; and on books, magazines, newspapers, fitness and wellness, personal care, children’s products, tobacco, alcohol, and takeout, by 15 percent to 29 percent.
Moreover, data culled from consumer surveys conducted by PricewaterhouseCoopers (PwC) yields insight into how the pandemic has impacted the methods consumers use to spend their money. In the wake of COVID-19, PwC found, 45 percent of consumers are shopping using their mobile phones, and 35 percent are buying groceries exclusively online.