More consumers prefer digital payments, a trend accelerated by the pandemic, results of a new survey from payments gateway Onbe reveal.
The rates of online shopping, mobile wallet usage, apps, and P2P payments have also risen.
Onbe CEO Bala Janakiraman said that while many platforms make it easy for businesses to accept consumer payments, few help companies send rebates, commissions, and consultation fees. That scarcity has helped Onbe amass a client roster of more than 500 clients that together have thousands of disbursement actions.
One key problem Onbe tackles is helping companies deliver incentive payments digitally. Do it right, and it opens up many opportunities, Janakiraman added.
Maybe it’s an appliance rebate program or a remaining balance refund that needs to be returned. That is hard to do digitally without help and expensive to do manually. Mailing checks cost as much as $20 to process, not accounting for customer service costs related to phone calls.
“When you take all of those payments and move into the digital world, you can communicate with the recipient and give them various options in which they want to receive the money,” Janakiraman said.
The survey’s timing is critical because the pandemic forced society to suddenly migrate even more online, and some behaviors are likely to stick, he added. The results will guide Onbe as it works with customers to adapt its systems to shifting consumer payment preferences.
Consumers expect the convenience of digital
“Businesses have coached each one of us to pay digitally to them. What consumers are now telling us is they expect this reciprocity back,” Janakiraman said. “Don’t send them paper because it doesn’t fit with their mobile life, with how they interact with the world.
“Don’t tell me the check is in the mail. I look at my mailbox twice a week, and if I don’t collect it, then that check is just sitting there.”
There’s surging demand for value-added services. Close to half (48%) of consumers say they value global payment opportunities and the ability to exchange payments for foreign currencies. This is highest with gig workers, creators, and folks in the hospitality industry.
Overall, 55% of those who sent funds across borders in 2022 did so digitally. No surprise, but younger demographics were most likely to transfer disbursements across borders. The three youngest groups (18-24, 25-34, 35-44) did so between 36-40% of the time, while the 45-54-year-old group did so at a 30% clip. The percentage of older people sending cross-border payments plummets to 13 and nine%.
Cash ain’t king – All hail digital
There’s a continuing drop in demand for checks and paper funds, though it won’t disappear, Janakiraman said. Most (63%) believe digital payments are more secure; nearly 25% plan on using cash less frequently or not all next year, while only eight% will use it more often.
“As we continue to see this trend grow, it’s vital for businesses to offer the right mix of payment forms to meet their customers’ needs. We’re proud to have helped our clients create modern, agile, and compliant disbursement operations to meet this demand.”
Digital surge spawns business opportunities
Customer digital expectations are rising; 23% of respondents are more likely to shop online, 18% are more likely to pay with a mobile wallet, 17% are more likely to shop via an app and make P2P payments, and 24% are less likely to pay with cash or checks. These numbers show opportunities to deliver value-added services, Janakiraman explained.
For Onbe, it begins with the payment wall. More than 90% of customers want digital payment notifications, with 41% preferring them via email, 27% via text, and 12% via an app. Speed and convenience are the most critical factors.
However, customers receive that notification; they get three or four curated options. They are selected by analyzing how that consumer interacts with the brand.
“Putting in the right set of options is where we see us providing that differentiated value-add to the client,” Janakiraman said. “We’ve looked at the survey; we know what consumers care about. We understand the context in which they interact with you and recommend that you include these three options because they are the most likely ones your recipient will utilize.”
Get creative to deliver value
Brands can get creative with the options they provide from there. Perhaps that refund can be split into remittances and digital gift cards. One certainty is that brands can accelerate spending by promoting products and special offers when sending the payment, as 59% of consumers say that when they receive a brand incentive, they will spend it with that brand either some or all of the time.
Combine that with the detailed knowledge brands have on consumer spending patterns. If you know that those who buy particular items often buy certain other ones, why not give them a nudge in that direction? Encourage subscription services for recurring appliance parts or servicing.
“That’s part of the brand extension where it’s not just about buying the product,” Janakiraman said. “The consumables that go with that can be part of the remarketing experience. When we let the person land on the page, there’s an opportunity where they can take that $100 and sign up for a service that the brand can continue to fulfill.
“Can I help them retain an existing customer? How can I use payments to drive that? That’s what is coming out in that survey. We have the tools to help these large brands continuously market with those associates.”
Top apps reflect shifting consumer preferences
PayPal is top of mind when it comes to preferred payment apps on phones at 60% of users. Venmo is second at 43%, and ApplePay is third at 32%. Janakiraman said he was initially surprised at Venmo but sees it as Gen Z’s growing influence.
The pandemic accelerated some present payment trends. Before 2020, most of us didn’t think twice about pulling out a card in the shops. Then suddenly, we couldn’t do that, and things changed.
“That’s when we saw the secular shift,” Janakiraman said. “I think it was in a span of three to four months. We saw we went from 30% digital card utilization to 50%. When you have a dislocation like that in the market, habits change. You never go back. That’s what we see in actual transaction flows through our platform.”
Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.