Just as the weather in much of the U.S. is heating up, so are some new payment trends that merit businesses’ attention. Here’s a look at where the sizzle is in mid-2021.
Focus on Flexibility
Consumers’ appetite for new, fast, and flexible payment methods—sparked and propelled forward in large part by the COVID-19 pandemic—continues to grow. According to the Mastercard New Payments Index, conducted across 18 markets around the world and released in May 2021, 93 percent of consumers will consider using at least one emerging payment method—including contactless or QR code as well as cryptocurrency and biometrics—in the next year. Nearly two-thirds (63 percent) of respondents said they had tried a new payment method they would not otherwise have utilized had the pandemic not struck.
Additionally, 71 percent of consumers queried by Mastercard claimed they expect to use cashless going forward. More than half said they would avoid businesses that do not accept electronic payments of any kind. “Looking to the future, digital currencies, biometrics, contactless, and QR codes are trending as emerging payment technologies as people’s comfort with them and understanding of them decreases,” Mastercard reports.
Moving into Contactless and Mobile
Contactless payments are taking off. In the first quarter of 2021 alone, Mastercard saw one billion more contactless transactions as compared to the same period of 2020, “with particular momentum in emerging contactless markets like the U.S…where contactless penetration grew by nearly three times year-over-year,” according to Mastercard. The report states that all signs point to a continued growth path for contactless payments, with nearly seven in 10 consumers using it this year.
What’s more, consumers embrace mobile payments and digital wallets, with both eclipsing cash transactions in 2020, a FIS report indicates. U.S. mobile payment transactions totaled nearly $131.4 billion in 2020, with 86.9 million users. This represents a 20 percent increase in dollar value, $110.5 billion, and a 15.4 increase in user numbers, eMarketer estimates from Insider Intelligence show. According to a report from Finaria., global mobile payments will total $2.5 trillion in 2021 but should surge by 90 percent, to $4.6 trillion, by 2025.
Juniper Research estimates that the number of digital wallet users will exceed 4.4 billion globally by 2025, up from 2.6 billion in 2020. The total amount spent through digital wallets will nearly double, from $5 trillion to $10 trillion annually, as of that year.
A-Plus for ACH
The movement of credit and debit transactions online in the wake of the pandemic, coupled with other factors, has led to a marked increase in automated clearing house (ACH) payments. Many consumers favor electronic check payments. ACH payments broke records last year, increasing by 8.2 percent to 28.6 billion transactions, according to Nacha. The growth momentum of such payments continues.
Real-Time Getting Real
The U.S. market is clamoring for real-time payments, with nearly 60 percent of the U.S. market now “expecting” it, a report by JP Morgan reveals. The Federal Reserve Bank’s FedNow project, initiated by the Federal Reserve to enable all financial institutions to participate in a real-time payment network 365 days a year, is expected to propel real-time payments forward.
Instant Payments Push
Growing right along with digital and ACH payments are instant payments. “After using instant payments services like Zelle, people began to wonder, why can’t every payment be this quick and easy, (and) the speed of payments is now accelerating,” according to the JP. Morgan Chase report. Insurance claimants and gig and economy workers want to get their funds in such a fashion, as do consumers seeking refunds from merchants, the report states.
J.P. Morgan Chase found U.S. market readiness for instant debit card funding solutions businesses can use to “push” funds to consumers’ eligible Visa, and Mastercard debit and prepaid cards stand at 99 percent.
Given ever-greater consumer demand for flexible digital payment options across the board, businesses of all types and sizes would do well to expand their menu of payment options.