The events of the past two years have shown that circumstances can change overnight, including the established methods by which consumers shop and pay for their purchases. Credit cards, a long-standing form of payment, lost ground in 2020 as consumers searched for alternatives that would allow them to make purchases without incurring hidden fees or going into debt.
This rapid transformation has posed both challenges and opportunities for financial institutions (FIs) that issue credit and debit card products. The recent holiday shopping season saw a resurgence in credit card use, but as health and economic factors continue to evolve, debit payment methods – especially contactless options – remain on the market. not to overtake credit cards as the preferred choice of buyers.
“Rarely have the trends that generate obvious gains in efficiency and convenience been reversed,” said Angela Finn, senior vice president and product manager of the Debit and Prepaid Card Products Group in Kansas City, in the United States. Missouri, Commerce Bank.
Still, Finn told PYMNTS in a recent interview that she is ready for more changes to come.
“I think consumer spending behavior will be fluid for a while,” she said. “If supply chain challenges and labor shortages persist, traders and consumers will continue to adapt their solutions and behavior accordingly, and the impact of COVID-19 variants on the public health and safety will drive it to a large extent. “
A change in the air
Finn said that while many people limited their shopping and in-person travel in 2020 due to the pandemic, shoppers believed it was safer to venture into 2021, and that was why Commerce Bank saw increased card spending this holiday season.
At the same time, however, many consumers have continued to rely on the e-commerce and mobile shopping habits they adopted during the pandemic – and some of the key spending trends seen over the past two years, including the growth in online and contactless spending, don’t. seem to come back.
“It’s hard to say what trends will continue, but new payment acceptance options that offer value to both merchants and cardholders, such as mobile app solutions and token acceptance / contactless, have the best chance of becoming permanent, ”she said.
Finn also said that while the company’s credit and debit products have performed well during the 2021 holiday season, it is difficult to predict where consumer behavior will lead the industry as the pandemic continues.
Buyers who experienced delivery delays or supply chain issues last year may have placed e-commerce orders earlier than usual to allow ample time to receive their goods, she said. declared. This could explain the more robust shopping season this year, and the rising cost of goods may also be factored into consumers’ choice of payment method.
Forecast payment trends
Finn predicts that the growth of non-present cards (CNP) will have the biggest impact on the company’s debit card program in the years to come, and the trend will prompt financial institutions to reinvent the products they offer.
“From an issuers perspective, the continued growth of CNP transactions will have broad implications for processing costs, customer service and fraud prevention models,” she said.
Finn explained that despite the increasing use of contactless payment technologies such as mobile wallets and CNP payments, a certain demographic still prefers cards and may be slow to embrace new technologies. As such, FIs need to pay attention to consumer trends and embrace new technologies with an eye to the future while continuing to satisfy those who prefer more traditional payment methods.
“Having the physical card to make a purchase at the point of sale is always very important to our customers and this is one of the main reasons why we were one of the first banks to issue contactless debit cards” , she explained. “Our customers quickly adopted the tap-to-pay functionality. “
Pivoting quickly to adapt to a changing landscape is never easy, but one prediction seems certain: Thriving on change in the payments world may soon become banks’ greatest asset.