Digital payment systems are becoming more prevalent, as new technologies are rolling out. Consumers switching to the new systems remains key to their success. According to a new survey, many North American consumers remain relatively happy with more traditional cash and plastic options, and are slow to take up new offerings. For FinTech startup developments in the space, a significant hurdle to overcome is the distrust by a majority of respondents in keeping their money and private details safe.
Disruption to payments has been on the cards for some time, as digital technologies and a range of new offerings from tech giants and startups come online. Payments is one area in which banks remain vigilant of potential disruption, with a recent research highlighting considerable potential for incumbents to lose market share.
In a new report, Accenture considers one of the key drivers for disruption in the space, consumer behaviour, as well as current sentiment around new payment solutions from a range of providers. The survey for the report involved 4,000 North American consumers.
Digital payment uptake
The survey finds that consumers in the US are becoming increasingly aware of the possibility of making payments through devices other than cash or plastic. Awareness has been ticking up in recent years, as vendors provide options for additional transaction possibilities, and consumers acquire additional devices, such as digital payment ready smartphones.
Consumer awareness is, according to the firm, a “bellwether for consumer readiness to pivot to digital payments.” As it stands, consumer awareness about their smartphone acting as a payment device has been ticking up in recent years, from 41% ‘extremely aware’ of the technology in 2012, to 56% this year. In addition, the number of ‘those not aware at all’ has fallen from 27% to 8%.
In terms of current and future use, the traditional payment methods of cash and debit card are projected to see small declines to 2020, from 60% to 56% for the former, and from 58% to 55% for the latter. Credit card usage is set to increase slightly, according to the respondents. These payment types continue to meet the needs of many respondents.
In the digital payments landscape, all categories are projected to see modest growth in utilisation by 2020, although still well below that of more traditional methods. ‘Paypal’, as an alternative payment providers, increases frequent use from 18% today to 23% by 2020, while ‘mobile wallet by card networks’, jumps from 14% to 22% in the same period. Digital currency use remains limited, at 12% in 2020 for the surveyed consumers, up from 9% today.
Trust remains a key driver for consumers in their decision to both use digital payment systems, as well as the kind of provider of that system. Trust in banks to keep money safe has fallen to considerable lows, following the financial crisis, however, respondents say that they continue to primarily trust traditional card providers (73% of respondents) to provide safe and secure mobile payment provisions, followed by alternative payment providers, such as PayPal.
Established retail banks come in at 62% of respondents, while large tech companies are trusted by 59% of respondents. Tech startups fare poorly in the study, with 24% of respondents trusting their offering – suggesting that there is a long way to go for disruption to emanate from a standalone FinTech player. Globally investments into FinTech startups is booming, jumping to $19 billion last year.
According to a study by BCG, the payments industry is worth $1.1 trillion today, with North America holding a 29% share. The continent will however in the coming years lose share to the faster growing emerging economies.