By Ray Birch
MARLBOROUGH, Mass.—The pandemic has led to a greater use of digital wallets, a resulting consolidation of card usage by consumers, and trends credit unions should be giving attention, reveals a new report.
The data from Mercator Advisory Group shows many consumers in the flight to contactless payments during the health crisis are no longer choosing among the several cards they have in their physical wallets, and are simply going with the primary card loaded into their phone.
That trend has led to very different debit and credit usage numbers, according to Mercator’s Fall 2020 North American Payments Insights, when compared with the numbers seen prior to the pandemic’s onset in early 2020. The shift will likely effect card usage once the pandemic is over, said Mercator Senior Research Analyst David Nelyubin.
“The share of respondents that reported using debit and credit cards has gone down from the 2019 level,” said Nelyubin. “We attribute this to the siloed concentration of consumer payments usage, caused by the accelerated shift to online shopping and expanded adoption of mobile wallets.”
Nelyubin said it is likely consumers are increasingly using a single card for more of their purchases as it is the payment method loaded into their accounts on ecommerce platforms and mobile wallets, and therefore dominates top-of-wallet.
“It is also possible that some consumers have had their debit and credit cards expire and have delayed renewing them due to disruptions caused by the pandemic and want to limit the number of unnecessary trips to the bank,” he said.
Mercator reported a year-over-year increase in the share of surveyed consumers who reported using mobile wallets in 2020.
‘Accelerated Continuation’
“This presents an accelerated continuation of the trend from previous years,” said Mercator Research Analyst Sam Klebanov. “We found that 13% of our total pool of respondents reported starting to use a universal mobile wallet—such as Apple Pay, Google Pay—during the pandemic, with a credit or debit card as the underlying payment method.”
The most common card added to a digital wallet during the pandemic is debit, according to Klebanov.
“If the online shift continues and those people continue to shop online regularly, it's likely we're going to see more stickiness in terms of the people who use debit, therefore making debit a larger proportion of purchases post pandemic,” said Nelyubin, noting the move away from credit, which payments data has consistently shown during the pandemic, is due to people’s efforts to better manage the household bottom line.
Unlikely to Revert
What will also spur greater usage of debit in the coming years is people simply not taking the step to remove the card they have loaded into their digital wallet as their primary form of payment, said Nelyubin, adding consumers shifting to digital wallets for their payments will not likely revert to dipping or swiping at the point of sale.
Another reason for the current emphasis on debit is consumers using credit cards less for large purchases, like travel and leisure-associated expenses.
In addition, Nelyubin forecast that spurring more debit usage coming out of the pandemic will be the increasing offers of rewards being rolled out for using that form of payment.
He expects it will take several years for credit to re-emerge and clearly become the dominant payments method, the position it held prior to the pandemic.
“We expect the share of consumers that use debit or credit cards to return to normal levels as the recovery from the pandemic takes place and people return to shopping through diverse channels. As this occurs, there will be a greater opportunity for more varied payment methods,” said Klebanov.
P2P Usage
P2P usage, the Mercator study shows, has also been markedly altered during the COVID-19 crisis, said Klebanov. The pandemic saw an expansion of P2P payment system
s such as Venmo and PayPal.
“This is another manifestation of the shift toward contactless payments,” said Klebanov.
Mercator data show the most popular P2P payment method during the health crisis has been PayPal.
“Fifty-seven percent of consumers used P2P services in 2019, growing to 70% in 2020,” said Klebanov. “Consumers are using P2P more for fund transfers and P2B purchases. Many merchants now take PayPal and Venmo as a payment method, allowing consumers to make contactless payments.”
Some consumers may have also chosen to forego traditional payments, such as checks and cash, preferring digital P2P transfer methods, Klebanov said.
Trend Will ‘Persist’
“As a result of increased P2P usage due to COVID-19, consumers are discovering that P2P apps can be used in a variety of ways,” said Klebanov. “Services are increasingly being used to share costs or split expenses with others, pay bills, and pay for things in a physical store. We anticipate this trend to persist as merchant adoption expands and consumers continue to enjoy the benefits of this payment method, which in many cases is more convenient and provides for easier tracking of spending.”