Consumers have more ways to pay than ever. Even with so many choices, consumers still use traditional payment options to complete transactions. Americans use plastic a lot and that is growing. Consumers’ use of mobile payments is gaining popularity but has not seen a dramatic upswing in usage. Mobile payments are gaining momentum in the payments industry (which is ruled by cash and cards) but the growth is not as fast as was predicted by the pundits. A survey by creditcards.com found that about two out of every five consumers use either a credit card or a debit card for in-person purchases of less than $5.
The shift towards a cashless society is transpiring across the US. Though cash is still the king, the trend shows that more consumers are using cards instead of cash to make small transactions. Card payments have steadily gained ground in the US in terms of transaction volume. At the same time, mobile payments are on the brink of becoming popular as we witness an increased shipment of smartphones combined with mobile wallets, change in consumer habits and growing retail acceptance.
The stigma of using cash for small purchase is long gone now. Age is the biggest predictor in whether someone prefers cash or cards or digital for small-dollar purchases. Younger consumers aged 18–29 prefer cards for small transactions, and college grads and parents favor card payments for their ease of use and comfort.
The American population that favors cash payments is decreasing every year. There are various reasons behind cards gaining popularity among customers for making small purchases. The most common reason being that cards are convenient; swiping a plastic card is easier than paying with cash, especially for busy professionals and families who might not have time to stop by an ATM or fumble with change in the checkout lane. Consumers consider cards to be more secure than cash. Card payments are protected and consumers can recover lost funds in case of fraudulent activities. Rewards are another added advantage for using cards that many credit and debit cards offer today and are attractive enough for consumers opting for card payments over mobile or digital payments.
On the other hand, technology advancements in the last five years have simplified the process for accepting cards and it’s now as simple as connecting a low-cost (or even free) card reader to mobile phone. This has put accepting cards methods within reach for almost everyone.
Another alternative to cash that is gaining popularity is the prepaid card. About 56% of US adults had bought a prepaid card for making purchases. Prepaid cards experienced the largest growth compared to credit cards and debit cards in the US.
Consumers expect to make fewer cash payments in the future while also cutting back on credit and debit card use in favor of other forms of payments. As consumers integrate mobile into every aspect of their lives, they are turning to their mobile devices to get things done wherever they are. Importantly, increased smartphone adoption has created a robust market for mobile wallets. Having said that, there is still an acceptance gap and this is the factor pushing the mobile payments on the back seat. With card readers and POS terminals installed in every shop and store, card payments are still popular methods of payments among consumers.
The use of cash has fallen more than 50% in the last four years and is projected to continue to fall as consumers look for faster and secure means of paying options. With a high degree of smartphone penetration in the US market, mobile and digital payments are rapidly gaining a market share in digital payments. With Apple Pay and Samsung pay getting into payments stream, expectations were set way too high from them. In the US cash-and-card-dominating payments market, mobile payments is yet to get a stronghold over bigger shares in the industry.
As newer technologies make it to the mainstream, the world of payments will keep moving towards digital payments; but it’s just not the end of plastic cards payments. The US is a credit cards society and the usage of cards is still very predominant and continues to grow over the years. With innovations delivering increasing convenience and benefits to consumers, the card payments industry is poised to reinvent itself.