Data Snacks, Member Exclusive

Data Snack: Out with cash and physical branches, in with contactless and crypto payments

  • Hygiene concerns during Covid-19 paved the way for the adoption of contactless payments, but the trend has remained strong post-pandemic too.
  • The prevalence of cash is shrinking, with less than half the people surveyed globally using cash on a weekly basis.
close

Email a Friend

Data Snack: Out with cash and physical branches, in with contactless and crypto payments

Though banking has been going digital for decades now, the COVID-19 pandemic proved to be a catalyst for its acceleration. ATMs, one of digital banking’s most revolutionary innovations, are falling in preference, as consumers increasingly ditch cash for contactless payment options. Similarly, with robust banking applications and websites, visiting physical branches, too, is going out of fashion. Lastly, as digital assets become more prevalent, consumers are now looking to use them for transactions.

Marqeta’s State of Consumer Money Movement Report 2022 studies this shift in consumer preferences. The report surveyed 4000 consumers from the US, UK, and Australia, and gives a look into how consumer banking is changing in the world’s most sophisticated economies. The report argues that consumers’ demand for convenience and accessibility to digital experiences is contributing to contactless payments becoming the new normal.

Consumers are becoming accustomed to mobile wallets

As Covid spread and people became more conscious of their hygiene, contactless payments became popular. However, as the pandemic slowly became less of a concern, that shift in preference remained. On average, 75% of the consumers surveyed globally reported using mobile wallets within the past year. 

  • Australia was found to be leading adoption, with 83%;
  • The UK clocked in at second, with 77%;
  • The US lagged behind the global average, with 71%, but that’s still a notable jump from 64% in 2020.

While hygiene concerns may have initially made people turn to contactless payment options, what’s keeping the trend popular is convenience, speed, and security. 67% of the respondents said they adopted mobile wallets during the pandemic, and 91% say they have used contactless payments either just as much, or more, since the first few months of COVID-19.

Over half of the people said they're so used to digital wallets that having to enter pin codes irritated them, and 67% said they preferred digital wallets for their in-built security features. Moreover, 85% of US respondents said digital wallets were convenient for them, as opposed to 89% of UK respondents and 90% of Australian respondents.

The ease of using digital wallets and increased adoption by merchants at POS is making most consumers feel confident leaving their wallets at home and just carrying their phones (61%). In this metric, too, however, the US lagged behind the UK and Australia. About 78% of American respondents believed they could use contactless payments wherever they wanted to – lower than the global average of 81%, but still an uptick from the 62% of Americans that agreed in Marqeta's 2020 survey.

Not surprisingly, younger generations were found to be more confident leaving their wallets at home than their older counterparts. This trend remained consistent globally.

The most interesting revelation from the report was that banks are being forced into competition over card spaces – users are not adding every card they have to their digital wallets. More than half of the respondents said they have only 1-2 cards on their digital wallets, which is a cause of concern for banks. Losing top of wallet status means a loss of revenue for providers, as consumers typically spend four times more on their top of wallet card than any other payment mechanism. Losing this status could also result in cardholder inactivity for banks, and they run the risk of losing their customers to competitors.

The reason for consumers not automatically adding cards to their wallets is not a lack of ease. 81% of the total respondents reported adding cards to be a simple process, and yet only 63% said they automatically do so.

Cash usage down; eyes out for crypto payments

Less than half the people surveyed globally said they used cash on a weekly basis, while 41% confirmed that the pandemic decreased their cash usage. One can gauge how cash has gone down in consumer preference by the fact that last year, the UK saw just 17% of purchases done through cash, as against 60% a decade ago, according to the Bank of England.

The decline in the prevalence of cash since the pandemic has been greater in the UK (55%) and Australia (53%) than in the US (32%).

American consumers' continued reliance on cash, as compared to those in the UK and Australia, can be attributed to four reasons: banking in the country is more fragmented, the tipping culture is more cash-based, there's a higher percentage of unbanked citizens, and they are almost twice as likely to be paid in cash.

Consumers are not entirely willing to say goodbye to cash yet. Many like to keep cash with them in case they need it for cash-only stores, or because they have to pay other people in cash. For some, it's simply muscle memory, especially for older people, who said they use cash purely out of habit. Furthermore, some argued that it’s better for budgeting – this was cited more by younger people (18-24 years of age) – as it can get messy trying to keep track of swipes, clicks and taps.

Cryptocurrencies also have consumers' attention. The US leads in cryptocurrency adoption, and unsurprisingly, the digital asset class was found to be more popular among younger consumers. The survey also found that while 93% of crypto owners hold it just as an asset, 83% would be interested in an exchange-powered debit card that would allow them to spend their cryptocurrencies as dollars.

Physical branches out of fashion; loyalty high in banking

While digital natives readily switched to banking online, older generations were often forced to adapt. Upon adoption, however, the ease of banking digitally has left a mark across generations. Almost half of the respondents said they rarely, if ever, visit a branch. Only 1 in 5 consumers globally said they would be ‘very inconvenienced’ if all physical banks shut down, while 1 in 3 said it would have no impact on them. 

Let’s review people’s dependency on bank branches in terms of deposits, a core function that people have historically gone to a bank for. The survey found that, if they had to make a deposit:

  • 34% would use their bank’s app;
  • 27% would go to a physical branch;
  • 27% would use an ATM;
  • 12% would use a third-party retailer.

Customers are loyal to their banks – the survey found that half of all respondents have never changed their primary bank. Many have remained with the same bank for 6 years to over 10, and the vast majority said their bank provides them with all the functionality they need.

The study also revealed that the majority of the people, skewed by older generations, would not be interested in banking with a non-financial services provider. However, others were found to be quite open about who they would bank with, and social networks led in preference.

0 comments on “Data Snack: Out with cash and physical branches, in with contactless and crypto payments”

Blockchain and Crypto, Member Exclusive

Bankchain Briefing: Banks onboard the blockchain train

  • The lawsuits and insults season is in full swing within the unregulated cryptocurrency space.
  • But cryptocurrency is just one facet of blockchain technology. Tearsheet asked experts for commentary on how traditional banks are experimenting with blockchains.
Lindi Miti | January 27, 2023
Green Finance, Member Exclusive

Green Finance Briefing: VCs are betting on climate tech amid a broader down market

  • Climate tech is accelerating at unprecedented pace, in contrast to the broader tech sector, with global VC funding reaching $70 billion in 2022.
  • This year, however, the growth rate of the climate tech sector is expected to moderate due to a challenging economic backdrop.
Iulia Ciutina | January 20, 2023
Member Exclusive, Payments

Payments Briefing: On Gen Z’s changing relationship with digital payments

  • This week, we talk about Gen Z’s changing preferences when it comes to sending and receiving money digitally.
  • We also discuss PayPal’s evolving BNPL strategy in a crowded market.
Ismail Umar | January 19, 2023
Lending, Member Exclusive

Lending Briefing: There is a recession coming but don’t worry, it’s not 2008 all over again

  • The oncoming recessions is one of the most anticipated downturns in recent history.
  • But things are not the same as 2008, here's why.
Rabab Ahsan | January 18, 2023
Banking, Member Exclusive

Banking Briefing: All aboard the transparency train

  • This week, we take a look into creating transparency within digital-first FIs.
  • We also discuss how banks seem to be overlooking the basics in their offerings, like loyalty programs or advice on investments.
Rivka Abramson | January 16, 2023
More Articles