On the payments side of banking, the battle for “share of wallet” has always been a critical element of profitability, especially for card payments. But even as the variety of ways to pay has expanded, share of mobile wallets has become even more contentious.
The thing of it is, financial institutions can’t fight on only one front in payments, especially in the wake of the pandemic.
While continuing to battle for credit and debit card business, banks and credit unions have had to recognize that failing to match consumers’ demand for convenience is deadly. Hence the importance of offering a P2P option (most often Zelle), which bypasses cards and wallets to draw directly on transaction accounts like a very fast check.
However, the payments business intersects with credit, in the form of credit cards, of course, but more recently with buy now, pay later point of sale payments that function as short-term installment credit plans.
People Still Like Their Plastic
“Plastic” continues to dominate the payments mix, even when there is no physical cards, because they are being used on mobile phones or computers, observes Raddon in its report, “Moving Money Around: The New Payments Revolution.” The research arm of Fiserv had consumers rate various payment instruments by six criteria and credit and debit cards held their own.
In terms of usage, the study found that the average user makes 23.2 payments a month. Here’s how that breaks out by method:
- Autowithdrawn from checking (including paid through biller’s website): 3.3 payments
- Financial institution bill pay: 1.9
- P2P payment: 0.5
- Check: 1.2
- Cash: 1.9
- Debit card: 6.8
- Credit card: 7.3
Interestingly, while younger consumers use debit and P2P more than other generations, the difference is not as great as might be expected. Millennials make 0.9 monthly payments by P2P and 8.7 via debit card, versus Boomers who make 0.3 by P2P and 5.7 via debit. But the differences can’t be ignored, because of the growth seen in P2P, which we’ll address later.
The study also found that the more a consumer spends, the bigger a role both debit and credit cards play. Big Spenders averaged 50.2 payments per month and that included 15.2 debit transactions (30%) and 14.6 credit card transactions (29%). Only 1.5 were made by P2P payment in this group.
The study divided the respondents into four groups:
- Majority Analog (8%): — still making at least half of their monthly transactions by check or cash.
- Majority Plastic (25%): paying at least half of monthly transactions with actual debit or credit cards.
- Majority Digital (40%): pay at least half their monthly transactions via mobile phone or computer. They use debit and credit but online, rather than actual cards. 78% use mobile banking in some form.
- Blended (27%): no single payment method stands out.
The average age among the Majority Digital is 50, with Millennials and Boomers dominating the mix. The study found that using credit and debit cards, actually or virtually, makes up more than half of their purchases.
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