For many years, people have been predicting that cash will disappear. With the majority of U.S. and Canadian consumers reporting to use cash at least some of the time, though, it’s unlikely that cash will ever be eliminated completely, at least in the near future. However, as consumers’ interests change and technology advances, it’s becoming clear that the public is quickly preferring the ease of card or digital options when making payments, and in fact, 20% of people report that they no longer even carry cash.
Popular Alternatives to Cash
Debit and credit card use far outweighs cash use among all income brackets, with those making over $75K a year preferring credit over debit. Research from 2016 showed credit cards are now the preferred payment option, and their usage is continuing to grow at a much faster rate than debit cards. This is an encouraging sign, fueled by the economy’s growth and recovery since the recession, and perhaps consequentially, a greater awareness among the public of how to manage finances. Despite this uptick in credit card interest, though, more transactions are conducted with debit cards because they tend to be used for smaller, more frequent everyday purchases.
Another competitor to cash that has taken off in recent years is peer-to-peer (P2P) payment apps, like Paypal and Venmo. Splitting the bill has never been easier for consumers, who no longer have to worry if they have enough cash to pay back their friend. P2P apps allow the user to link to their bank account, and with the click of a button, funds are transferred to someone else’s account. Millennials are driving this trend, as they use P2P methods more than any other group.
Mobile wallet usage is another alternative to cash. While usage is growing quite slowly, it is picking up speed as a viable payment option. In 2016, debit card enrollment in Apple Pay increased by 80%. Even though mobile payments make up a miniscule percentage of all purchases, it is clear that interest is growing, and once retailers get on board and start accepting mobile payments, it’s likely that customers will respond accordingly.
What’s Driving This?
There are a number of factors contributing to the increase in card and mobile payment usage, and most significant is the effect that technology has had on consumers. For one, online shopping continues to explode in popularity, and this platform necessitates the use of debit or credit cards. In addition, with increased smartphone usage and expanded wifi connectivity options, people are now enjoying the convenience of shopping anywhere.
Another effect on increased card usage is the growth of the economy. Lenders feel more comfortable making more credit approvals, and consumers now have the income and financial savvy to take on credit. With an increased ability to use credit, the public has a growing attraction to rewards programs. In fact, rewards programs are now the number one influencer among consumers when choosing a card. Credit card issuers have responded to this, and they’re rolling out innovative and competitive rewards programs.
As more and more facets of our lives are optimized by digital technology, it makes a lot of sense that consumers want to use payment methods that eliminate confusion, save precious time, and even offer rewards. For merchants, it’s important to recognize these preferences among consumers. Accepting a variety of card and mobile pay options and launching a mobile-friendly online shop are significant ways that you can meet changing customer shopping habits.
For more information on card processing options and integrated terminal and POS systems that can manage online and mobile transactions, contact Fidelity today.