MacroMonitor Market Trends Newsletter August 2020
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The Future of Digital Transactions
As the United States struggles to emerge from the COVID-19 lockdown, many people are rethinking the wisdom of some traditional behaviors. For example, handling money (bills and coins), and the use of touchscreens pose health risks not previously considered by most consumers. Cleanliness, convenience, and the need for social distancing all contribute to the accelerated adoption rate of direct (digital) transactions.
Transactions such as P2P—peer-to-peer, or person-to-person—payments facilitate money transfer from one person to another person without the direct involvement of a third-party, or direct contact with physical money. Prior to the pandemic, fifty-five percent, or roughly 77 million households (HHs) in 2018, currently use a P2P payment company.
An overall comparison of HHs that now use a P2P payment company increased from 45% of households in 2016 to 55% of HHs in 2018. PayPal (introduced in 1998) continues as the category leader. Recently, some new players have emerged: Apple Pay (2014), and Samsung Pay (2015) are the most notable. However, several measurable companies have lost ground (MoneyGram, Google Wallet, Square, and Western Union). Two companies show positive growth: Venmo (2009), and Zelle, formerly clearXchange (2011)—rebranded as Zelle in 2017. Households may use more than one P2P service depending on the nature of their transaction.
The digital evolution of the financial industry, and the increasing adoption-rate of digital-payment tools (such as P2P payments), moves the country ever closer to a cashless society. Mobile banking (mobile-wallet apps), online banking (web sites), banking cards (credit and debit), point-of-sale (POS) machines, scanned QR (quick response) codes, RFID technology, and contactless payments are all part of digital banking.
Shelter-at-home and social distancing have created the optimum environment for digital-banking activity. In early May 2020, Digital Transactions reported that PayPal-Holdings expects the shift to digital options to be permanent. To demonstrate, PayPal added 7.4 million new, active accounts in April 2020; on May 1, they "had the largest single day of transactions in our history," said PayPal chief executive Dan Schulman. As a result of the COVID-19 crisis, Schulman estimates "online commerce has accelerated two to three years."
Millennials are credited with the success of P2P payments. However, most households headed by early-adopters—not just Millennial heads—have already made the shift to digital. (Nine in ten P2P users currently bank online and 45% invest online.) What are HHs digital-banking expectations? Which providers meet or exceed those expectations? Directionally, a majority of early-adopters are heavy Amazon and Facebook users—they expect a similar, or better, experience from digital-financial providers.
Find out more. To learn about households interested in using P2P payments in the next 12 months, please contact us today!
Additional deliverables are available to MacroMonitor subscribers:
- The August 2020 Segment Summary: Moving Toward a Cashless Society
- The underlying set of data for this Segment Summary (by request)
For more information, please contact us today!
MacroMonitor Trend Insights Mini-Presentations Now Available
The 2020–21 MacroMonitor will go to field this summer. In addition to providing a comprehensive view of US household finances, the 2020–21 survey is perfectly timed to chronicle how different types of households are adopting new or different behaviors.
Meanwhile, CFD's new series of mini-presentations look at consumer reactions to past recessions to provide insights about the likely consumer fallout as our country emerges from the COVID-19 pandemic to a period of economic disruption.
Mini-presentation topics include:
- Outlook for the use of financial advice and advisors in the wake of COVID-19
- Likely impacts of COVID-19 on household debt
- Outlook for retirement and salary-reduction plans following the COVID-19 pandemic
- Trends in life-insurance ownership and opportunities for the industry following the COVID-19 pandemic
- Likely changes in U.S. home ownership following the COVID-19 pandemic
- Discussion of U.S. households' annual financial transactions following the COVID-19 pandemic
- Likely impacts of COVID-19 on U.S. households' risk tolerance