The rise of digital wallets and the disappearance of plastic cards
For a few years now, predictions have suggested that plastic credit cards or any other physical payment method will not be around for very long. On the other hand, speculation about how long we will keep cash in our pockets has always been a popular discussion among financial experts. Various founders of financial institutions, as well as industry experts, used to base their predictions for the future of payments on the rapid growth of digital payments.
While digitization undoubtedly plays a key role in the rise of digital alternatives, recent global developments in the aftermath of the COVID-19 pandemic have shown us a different range of possibilities for rapid behavioral changes among consumers. At the start of the global pandemic, many governments took steps to protect their citizens, causing lockdowns to varying degrees. The immediate consequence was, of course, a sharp reduction in expenses as well as the use of cash. The fear of contracting the coronavirus through high traffic ATMs and in some cases the refusal of traders to accept cash can only be seen as a great addition to an already declared war on cash.
The fear of being infected and the urgency to spend a minimum of time in store to avoid interactions at the checkout have led consumers to digital solutions. Considering the fact that, especially in mature and emerging markets, the trend for digital wallets is on the rise for in-store and online purchases, immediate digital adoption is less surprising. During the crisis, due to a rapid change in consumer payment behavior, the ability to pay by contactless card proved to be very popular during the pandemic. New data from Visa shows contactless cards have been used in 73% of all card transactions around the world over the past year.
And technologies that qualify to replace plastic cards Already exists. Additionally, options like QR codes, NFC, and temporary PINs have been around for some time, but true adoption and market breakthrough only appear to have happened globally since the start of the market. pandemic. Indeed, according to statistics, 86% of contactless first-time adapters are now likely to proceed to contactless payment. This trend could spell an end for both cash and plastic credit cards.
Predictions and results
The demand for mobile wallets was on the rise before the pandemic. Countries like France, Italy and Germany had nearly 150 million smartphone users in 2019 alone. And by 2025, it is even reported that 80% of transactions will be made through internet-based devices. By then, e-wallets are expected to be the second preferred payment method after cards and the most preferred method among Millennials.
Predictions made before the pandemic may need to be adjusted as COVID-19 and the extreme measures taken have allowed for changes that could, under normal circumstances, take years to set in.
So, are smartphones going to make credit cards obsolete? Or will there be a return for our beloved plastic purchasing power?
The results of the survey before the pandemic suggested that many people were not Ready to give up their beautiful leather wallets. To make sure if this becomes reality, we will have to keep consumer behavior trends, as well as the rapid digital growth of payment technologies, closely on our radar.
When things, if anything, return to normal, a slightly different, consumer-focused payment journey may well await us.
I would put my money on the days gone for free with plastic cards, scanning watches instead of inserting chips and presenting QR codes at an ATM instead of standing in line behind the masses. But then again, I’m a Millennial.
This article is part of the 2021 Payment Methods Report – Latest Trends in Payment Preferences, a comprehensive overview of the payment methods being considered for 2021, as well as best practices for optimizing payment and converting customers to addressing digital transformation, security and localization.
About Isabelle Isil Ugurlu
Isabelle Isil Ugurlu currently holds the position of Head of Payment at elumeo SE and has also taken on an additional role within the group and became Money Laundering Reporting Officer in 2019. She is also an active part of EWPN (European Women Payment Network) since 2018 to promote the network’s presence in the German fintech industry. She initiates partnerships with leading organizations and holds Meetups, which not only cover hot industry topics, but also focus on important issues like diversity.
elumeo is a leading European company specializing in the production and sale of a wide range of gemstone jewelry. Founded in 2008, it combines the centuries-old tradition of craftsmanship with the economic benefits of electronic sales channels.
EWPN is a non-profit organization dedicated to building a community for women in the fields of cards, fintech and payments in Europe. As the first and only pan-European community for women, EWPN strives to create more opportunities for women and minorities, while being a champion of a more diverse and inclusive industry for all. EWPN does this by hosting local networking evenings, workshops, annual events, awards and research, in which all are welcome to participate.