Since March, social distancing practices enacted to help slow spread of the coronavirus have plunged us all into a “new normal” of staying at home, self-servicing, shopping online, and curb-side grocery pickup. While there are still many uncertainties about the long-term impact of the coronavirus on our lives and economy, one thing that’s certain is that the world is going to be different on the other side. This means that keeping up with consumer trends in payments preferences is going to be paramount, and financial institutions that are able to adapt quickly to the changing market will be rewarded.
Right now, financial institutions have the opportunity to leverage technology and self-serve channels to empower their account holders and borrowers to manage their banking needs, while minimizing their trips away from home. In this blog post, we’ll discuss trends in self-service and contactless payments and let you know how diversifying your payment channels can give your institution a strategic advantage going forward in a post-coronavirus reality.
Consumers can make contactless payments by simply holding a debit or credit card near a payment terminal. Until recently, Americans had been late adopters of this technology. According to CreditCards, as recently as the summer of 2019, contactless payments accounted for only 0.18% of payment transactions in the U.S., while outside of the U.S., 48% of in-person transactions are contactless.
With the adoption of strenuous social distancing measures meant to minimize physical contact, this is beginning to change. According to a recent study by The Futurist Group that surveyed U.S. consumers before and after the coronavirus began spreading, around 38% of consumers now see contactless cards as a basic need or feature of payments. This is up from 30% a year ago.
Many experts posit that contactless payments will be the wave of the future as consumers become more comfortable tapping their card for instant purchases and more merchants begin accepting this form of payment. This is already happening around the world. According to the Wall Street Journal, e-commerce transactions in Italy have soared 81% since February. For financial institutions, investing in the latest card-based technology so that your account holders have access to the convenient payment methods they crave is key.
Mobile payments apps and mobile wallets
Using mobile payments apps and mobile wallets to make purchases has grown in popularity with consumers. Mobile payment apps like Venmo and PayPal allow users to transfer money to and from any connected bank account in the U.S., and many foreign accounts. A mobile wallet, like ApplePay, is a virtual wallet that stores card information on a mobile device that can be scanned at the payment terminal.
In a post-coronavirus world, we will likely continue to see the use of mobile payments apps and mobile wallets continue to rise as more and more people across the globe search for ways to minimize their cash interactions. This shift will also be fueled by Generation Z—a generation coming of age with no memory of life without a mobile device glued to their palms. As they begin to expand their economic power, we will likely see increased adoption of non-traditional purchase methods and peer-to-peer payments.
In the days since the coronavirus has swept across the country, many branch lobbies have closed, employees and account holders have shifted to working from home, and entire cities have been effectively shut down under shelter-in-place orders. This means that self-service payment channels are no longer a convenience; they have become a necessity, and financial institutions are having to adapt.
An ongoing trend toward self-service has been apparent in the industry for years, particularly to younger account holders. In fact, more than 60% of American consumers reported that they prefer using digital self-serve tools for simple inquiries. We’ve seen this trend come to life with our partners. When Financial Center First launched its eServices platform, they saw a major shift in how borrowers paid their loans, and within a year of diversifying their payments platforms, they experienced a 161% increase in payments processed through self-serve channels.
These are challenging times for financial institutions as they try their best to adapt to change while still serving their account holders. While offering stellar service may seem more difficult at a time when we can’t interact face-to-face, providing your account holders with payments options that they can access safely and conveniently from home will add more value right now than in-person transactions.
To learn more about how Financial Center First increased their total funded transactions through self-service channels by 161%, download the case study.