Personal Finance

Catching Up with the Pluralization of Consumer Money Systems

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The days of consumers using one payment method for all of their daily financial transactions appear to be long gone.?Today, the same person that writes a check for a rent payment, has a credit card set up in a ride-sharing app, uses a debit card at the grocery store, pays with PayPal online and sends money to friends using Venmo.?While consumer choice when making purchases is critical, the point of choice and decision is changing.?While the battle used to be about \”top of wallet\” at the time of purchase, the new reality is about payment products having to be \”top of mind\” much earlier in the consumer\’s daily routine and when they establish a relationship or transactional experience.

The payment products that individuals use for each type of purchase is now dictated by three core tenantsCspeed, convenience and value.?Sometimes, this is more of a perception than reality; but, these tenants now drive behavior.?Navigating all of the apps and services that deliver on these tenants might seem like a complicated mess for consumers using so many different payment types in the course of a day; however, it\’s this recipe of various methods and tools that make up their unique and individual money exchange ecosystem. These new ecosystems have significant implications for financial institutions, payment providers and consumer brands that make up the new monetary exchange universe and call on all of these parties to work together to integrate payment solutions that help consumers better assess, choose and manage their financial lives.

Multiple Payment Methods for Multiple Purposes

In today\’s world, consumers have more choices and payment methods available to them than ever before, depending on the type of transaction they need to make. For some consumers, using a traditional bank account accompanied with a debit card is their sole payment method for daily purchases. Meanwhile, a growing number of millennials prefer a prepaid card coupled with digital wallets and apps like PayPal, Venmo or Square Cash on their mobile phone to pay for other items on-the-go.?A new \”segmented convenience\” mindset seems to be driving this trend.

Other consumers have chosen to use a credit card that offers points or rewards to help pay for their next vacation along with their debit card that\’s linked to their bank account. While older consumer segments are more comfortable using checks and credit from traditional financial institutions and credit card companies, they may not be aware or willing to use more modern payment methods that are emerging quickly across the consumer buying landscape.?In some instances, consumers use four or five different payment options for a specific purchase or transaction.?Clearly, these multiple payment methods being used for multiple purposes create an opportunity for companies to give consumers what they want C access to a suite of tailored payment methods that meet their financial needs. Providing this flexibility will be vital to the success of any company operating in the ever-evolving digital era of the payments ecosystem with an acknowledgment that consumers will be \”shared\” between and across brands, services and social media/distribution channel entry points.

Speed, Convenience and Value

The payment solutions that individuals use for each type of purchase or cash access transaction will be dictated by three core tenants C speed, convenience and value.

  • Speed:?Whether a company offers a prepaid product that enables a deposit to be made up to two days faster or an app that offers mobile alerts or funds transfer, speed is a top priority for consumers within their payments system and preferences.?Consumers want to be able to pay for their groceries, transfer money to another account and tip a valet driver with the simple click of a button on their smartphone. According to the 2017 TSYS Consumer Payments Study, 59 percent of consumers said they made a purchase through an app that has a credit card on file when shopping online, up from 46 percent in 2016. Using an app with an embedded credit or debit card eliminates the time-consuming requirement of manually entering their personal information before making a purchase and creates a default payment choice for the consumer.
  • Convenience: Consumer spending behavior has changed dramatically over the past decade and convenience and a seamless consumer experience, has become king. The days of consumers regularly visiting local malls, retailers and big box stores are changing and these experiences are now being packaged with additional lifestyle and entertainment options.?Now, consumers can order almost anything online, from groceries to computers and massages to therapy sessions, and it is delivered to their doorstep or location of their choice.?Consumers have and will continue to seek out payment methods and options that provide this same level of convenience and allow them to easily make purchases from wherever they are on any device they choose
  • Value: Rewards programs, both niche and multi-brand, are a growing trend and many consumers factor these programs in when choosing a payment method. According to the TSYS 2017 Consumer Payments Study, 75 percent of consumers have a credit card with a rewards program, an increase from 58 percent in 2015. Consumers want to see value from their purchases and payments. For years, major airlines and hotel brands were the only verticals offering rewards programs through credit cards. Now, reward programs have continued their expansion and are available across most verticals, including retail, insurance, restaurants and grocers. Rewards programs are also being offered in the prepaid space and through platforms such as Dosh. Without question, these programs will increase the likelihood of multiple payment methods of choice and even further \”segmented convenience\” creating more accounts, real and virtual, that will mean more compartmentalized spending habits and behaviors.

Now more than ever, consumers have endless choices when it comes to making purchases, and consequently, companies within the payments ecosystem have an obligation to help consumers better manage their financial lives by creating easier access to propositions built on speed, convenience and value. This will require a collaborative effort across the industry that allows for interoperability, standardized tokenization and access through various social media/distribution channel entry points.?Rather than continuing to create recycled product offerings, the industry needs to develop and invest in long-term robust solutions that provide seamless and safe access for all consumers that fit within their own unique, individual monetary ecosystem, and ultimately cultivate an engaged, satisfied and loyal customer base.

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