The Future of Emerging Payments: Connecting Cash with Digital
While consumers have numerous methods of payment at their disposal, there isn’t a single value-based ecosystem that effectively connects cash, digital and loyalty rewards today.
Herein lies a critical opportunity for retailers and payments companies to drive engagement, higher customer satisfaction, better customer experiences and sales. Businesses that combine payment methods seamlessly and interchangeably stand to better meet customer expectations and come out on top in 2020 and beyond.
In order to better understand the opportunity ahead, consider a few points on the current gaps in payments efficacy in the U.S.:
People Want to Use Mobile Wallets—But Can’t
According to research from Blackhawk Network, traditional payment methods are still preferred among consumers, but mobile wallet adoption is on the rise, and could generate nearly $190 billion in transaction value in the U.S. by 2021. In fact, three out of five smartphone users have a mobile wallet2—you might even be one of them.
But as of October 2018, only 50 percent of restaurants and retailers accepted mobile payments. In-store use of mobile wallets has seen slow adoption in the U.S., largely due to the legacy hardware and traditional check-lane terminals many retailers are still using.
Shoppers who want to pay with a mobile wallet but aren’t able to experience avoidable frustration.The demand is there,but retailers are crippling mobile payment usage and adoption by underestimating the importance of accommodating these consumer payment tools.
Read More: Are Banks Going to Win on Open Banking?
Loyalty Points are Underutilized
How many loyalty and reward programs have you signed up for? And how many actually keep you engaged? Loyalty programs are all the rage; according to study from Blackhawk Network,87 percent of Americans surveyed belong to at least one loyalty program. But the findings4 also uncovered that while, on average, consumers are members of six loyalty programs, they only actively participate in four.
Blackhawk’s survey found that people want more accessible redemption opportunities, prefer to redeem their points at least once a year and want to redeem before they hit the $100 mark in reward earnings.Research1also showed growth in loyalty points-based payments, especially among younger generations, and an earlier Blackhawk study found that 60 percent of consumers surveyed find the idea of using loyalty and reward points to pay for something appealing. But many programs don’t offer these options.
Unfortunately, as a consumer, you aren’t empowered to redeem rewards how and when you want—eliminating valuable touchpoints that encourage brand loyalty. Think of how many millions of points go unused because companies aren’t enabling the right redemption avenues. Now is the time to accommodate these emerging preferences as they gain popularity, especially since the buying power of younger generations will increase in the years to come.
The Digital Economy Doesn’t Play Well with Cash
A 2019report by the Federal Reserve System found that nearly one-quarter of Americans are unbanked or underbanked. Consumers who are unbanked, underbanked or simply prefer to pay with cash likely find online purchases difficult or impossible to make. And those who are paid in cash don’t have abundant opportunities to participate in the digital economy.
There’s a need to meet the demands of consumers looking for a seamless payment experience no matter the channel—including cash. Recent research5 found that among gig workers surveyed, 90 percent liked the idea of being able to cash out their earnings with an app as opposed to a bank and 70 percent of respondents would be interested in loading cash into a digital wallet or app. The unbanked and underbanked represent a significant amount of buying power that is being ignored.
The Future is Now
So, what could more unified payments experience look like?
Imagine you’re a consumer who prefers to pay in cash, but also wants a subscription for an online TV streaming service. Being able to go to a grocery store and use cash to pay for your monthly subscription would be a game-changer.
Or what if you drive for a rideshare company but are unbanked? Being able to cash out your pay at a retailer or service provider would help provide painless access to your money and enable you to buy directly from a retailer when you need to.
Or finally, what if you have millions of loyalty points but nothing in the merchandise catalog looks good? What if you could access that point value via mobile app to pay for a movie ticket, gas or groceries on the spot? The freedom to use your points for exactly what you want, when you want would certainly create a more rewarding experience.
Who’s Getting it Right
Years ago, the payments and retail industries came together to create a flexible way for people to buy payments tools from many brands in one place via the Gift Card Mall™. Today, other forward-thinking companies are innovating new ways to bring together disparate payments more invisibly.
For example, Ibotta enables shoppers to earn reward money for in-store or online purchases, connect loyalty accounts in-app and cash out earnings with Venmo, PayPal or a gift card to the retailer of their choice. Another example: Alipay enables Chinese travelers visiting the U.S. to pay using their Alipay mobile wallet (ubiquitous in China)without having to hassle with exchange rates, providing a seamless shopping process.
Connecting cash, digital and loyalty for more unified payment experiences will likely be the next frontier in emerging payments, as consumer expectations for flexibility and simplicity continue to rise.Research5 supports the idea that the majority of consumers are interested in using different forms of emerging payments like apps that load cash digitally enable loyalty points to be used in lieu of currency. We look forward to seeing who recognizes the demand for these innovations and blazes the path in 2020 and beyond.
“Retail Trends and Transformations” is an online survey conducted by Murphy Research on behalf of Blackhawk Network between February 4 and February 12, 2019. The sample size included 3,381 respondents between the ages of 18 and 75.
“Proximity mobile payment transaction value in the United States from 2015 to 2021” was published by Statista on July 23, 2019.
“The Automated Retail Tracker June 2019” data was published by Worldnet Payments on June 28, 2019.
The consumer loyalty verticals research is an online survey conducted by Leger on behalf of Blackhawk Network between February 5 and February 15, 2018. The sample size included 1,500 American respondents ages 18+.
The “Emerging Payments” verticals research is an online survey conducted by Leger on behalf of Blackhawk Network between October 3 and 22, 2019. The sample size included more than2,200 American respondents ages 18+.
“Report on the Economic Well-Being of U.S. Households in May 2018 – May 2019” was published by the Federal Reserve System on June 5, 2019.