What Are the Preferred Payment Methods for Customers?
May 18, 2022
The definition of walking around money sure has changed. It used to be the jingle of coins in our pockets or a wallet stuffed with bills, but today it can be a card or a mobile phone. As payment technology evolves and our comfort with leaving our wallets at home grows, our reliance on cash continues to decrease. If you’re focused on giving your customers what they want, knowing how they want to pay you is critical. Below we reveal current and emerging payment trends so you know if you’re keeping pace or need to up your game.
Consumers Prefer Debit and Credit Cards
Consumers still love the convenience of credit and debit cards, making them the most popular payment types, followed by checks and cash. These preferences haven’t changed between 2019 and 2021. This shows that consumers are still using a wide range of payment types and that you shouldn’t be relying on just one or two. Customers want to be able to pay and get on with their day, and a lack of payment options makes that more difficult. If your payment type acceptance is lacking, you’ll struggle to meet customer expectations and elevate the customer payment experience.
Cash Is No Longer the Go-To Payment Method
Cash has been losing favor with customers for years, but the pandemic accelerated our reliance on other payment methods. In October 2020, U.S. consumers made an average of 34 cash payments, down from 39 in 2019, and cash use accounted for 19% of all payments, down 7% from 2019. Additionally, the share of individuals who preferred to use cash for non-bill payments declined by 5% compared to 2019. All signs point to this trend continuing as consumers get used to the convenience and ease of digital payments. This is why customers use preferred online payment methods today.
The Rise of Digital Wallets
There’s been a measurable rise in digital wallets over the last few years, primarily fueled by the pandemic. The KUBRA 2021 Customer Experience Report noted that 23% started using PayPal, 18% Apple Pay, and 13% Google Pay after the onset of COVID-19. The same report found that 42% of consumers were likely or somewhat likely to try new payment technology like digital wallets when paying for their monthly services. What’s also notable is the predicted growth in the near future. According to Juniper Reseach, over the next five years digital wallet spend is expected to grow by 83% to more than $10 trillion. With widespread adoption like that, it’s time to seriously consider enabling digital wallets for your customers, if you haven’t already.
Peer-to-Peer (P2P) Payments Are the New Kids on the Block
P2P mobile payments are beginning to take off, with 79% of consumers saying they’ve made them through their financial organization or another company. Despite the seemingly high use, 47% of consumers said they don’t know if their financial institution offers the ability to make P2P payments. So there’s work to be done on raising awareness of this payment solution. With a bit of consumer education, EMarketer projects that P2P transactions will reach $612.2 billion in 2023, up from $219.6 billion in 2018. It’s also predicted that P2P mobile payment users will more than double by 2025.
Credit Cards for Boomers, Debit for Gen Z
As with all trends, there are generational differences regarding payment methods, with one exception–debit cards. They bridge all generation gaps, with between 31.6%-39.2% of the population reporting that debit cards are their preferred payment method. Credit cards are most popular with customers 65+, and debit cards are least popular with this group. On the flip side, Gen Z is least likely to favor a credit card due partly to their aversion to credit, and some are too young to qualify for and use credit. Given their comfort with technology, it's not a surprise that customers 18-34 are more likely than older customers to be interested in paying via mobile/digital wallets. However, the interest in paying via PayPal is higher among customers aged 35-49 than those 18-34. The lesson here is that providing a variety of payment options for customers is critical to meeting all your customers' needs, regardless of age.
Utilities Are Missing the Boat on Digital Wallets
Utilities should get a pat on the back for the array of payment methods they currently offer their customers. Across the board, they are accepting credit and debit cards. The majority are also still accepting checks, and a significant number offer electronic bank transfers and cash payments. The glaring oversight right now is the lack of utilities offering digital wallets to their customers. Currently, only 11% of utilities offer Apple Pay, 9% PayPal, and 8% Google Pay. With digital wallet use only expected to grow in the next few years, utilities should be adding them to their payment mix if they wish to cater to their customers’ digital payment needs.
Utilities Need to Embrace Digital Payments
As customer experience management experts, we keep tabs on customer preferences so we can provide the solutions you need to keep your customers satisfied. Right now, that’s digital payment methods, like digital wallets and mobile apps. KUBRA's customer payment options offer those and more. So if you're considering updating your payment acceptance options, contact us today to learn more about how KUBRA can help fill in the gaps.
Other resources you may find interesting:
- KUBRA Citizen Billing and Payment Report 2021.
- 2021 Findings from the Diary of Consumer Payment Choice, Federal Resrve Bank of San Francisco.
- The Mobile Wallets Report from Boku/Juniper Research, 2021.
- Mobile and Digital Paymenys Continue Upswing, 2021 Expectations and Experiences:Consumer Payments, Fiserv.
- “Strong growth from Venmo and Zelle drives P2P transaction volume,” eMarketer, November 2019.
- How Gen Z is embracing digital payments, eMarketer, 2021.
- Which payment method do Americans prefer?, finder, 2021.
- Logica, 2021.
- Mobile apps and wallets provide opportunities for utilities to meet customer needs, preferences, Chartwell, 2022.
- The Digital Payments Edge: How Utilities and Finance Companies Can Enhance The Bill Payments Experience, PYMNTS and ACI, 2022.