How our payment habits are changing: three major trends that are here to stay

Last updated: 17 August 2022

With a recent survey by Mastercard showing that almost two thirds of consumers have tried a new payment method in the past 18 months, how we pay is changing. The Covid-19 pandemic has accelerated a shift towards digital banking, with consumers beginning to ditch traditional payment methods like cash or checks in favour of alternatives such as eWallets, contactless ATMs and biometric bank cards.

From a rise in contactless payments to eco-friendly payment cards, banks are continuing to innovate their payment methods to keep up with consumer demands. As enthusiasm for smoother, more convenient ways of paying grows, consumer payment habits will continue to change and evolve.

Here’s how our payment habits are changing, and the major trends that are here to stay.

Contactless as the payment method of choice

Health and safety concerns due to Covid-19 have driven consumers to opt for payment methods that eliminate the need for physical contact during transactions.  There has been a surge in contactless card payments as a result, with the number of contactless purchases made in May 2020 doubling compared to the same month in the previous year.

This has led to increased demand amongst consumers for a lift on the limit on contactless payments. While widely varying between each country, these are generally on the rise worldwide. In April 2020, the contactless limit increased to £45 in the UK and €50 in most European countries. The UK government further increased the limit on contactless spending to £100 from October, but the two countries with the highest limits are Canada and Japan, with £147 and £130 caps respectively. The countries with the lowest limits are Iran, with £3, and Malawi, at £5.

Banks have also expanded their contactless payment methods to meet this demand, with consumers now able to choose between a wide variety of options including contactless ATMs, eWallets and biometric payment cards.

An increase in mobile payments

Another way our payment habits are changing is a rise in mobile phone payments. According to a recent report by UK Payment Markets 2021, the number of people registering for mobile payments by the end of 2020 has increased by 75% in the last year to over 17 million, with over half using this method to make payments either fortnightly or more frequently.

However, the age demographics for mobile phone use for payments vary, with young people aged 18-34 significantly more likely to pay using their phone, while just 1 in 10 aged 65 or over have registered.

As well as offering a convenient way of paying, mobile payments also offer added security. For example, biometric authentication such as fingerprint or facial recognition can be used to verify a user’s identity, enhancing security and reducing the risk of fraud.

The mobile payments technology ecosystem is continuing to expand, with eWallets offering a convenient way of storing payment and card information on a user’s mobile device. New technology like Digital First also means consumers can have their digital card issued to their phones instantly. As the number of mobile payments continues to grow, the innovation of mobile payment technology will prevail.

Innovating the traditional payment card

Mastercard’s recent decision to phase out magnetic stripes on all cards by 2033, with them becoming optional even earlier, points to the established position of Europay, Mastercard and Visa (EMV) cards – and the inherent security benefits they bring. This has been brought about by the massive adoption of EMV cards worldwide, with over 10.81 billion EMV chip cards in circulation by the end of last year.

The convenience of contactless transactions has also led to the widespread introduction of biometric payment cards. These contain an embedded fingerprint sensor that provides convenient and extra authentication when a payment is made. The fingerprint data captured by the biometric sensor are securely and locally compared with the cardholder’s reference data on the card chip – neither are they kept on the bank servers nor by merchants.

The biometric payment card provides an even better completion rate than contactless payment via a smartphone thanks to specific and stringent EMV schemes certification requirements. Unlike other contactless payment methods, biometric cards have no payment limit on transactions, making the payment experience frictionless for consumers.

Several banks worldwide have already trialed their own biometric payment card, with BNP Paribas (BNPP) being the first to launch the card commercially. The bank first launched a pilot with hundreds of users in 2019 and used the learnings from it to ensure a seamless customer journey, including improving the enrolment process. When it came to the commercial roll out, the bank continued to perfect the solution with Thales to offer account holders the ability to enroll using a specific card reader for capturing their fingerprints. Today BNP Paribas customers can benefit from a payment card that provides them with a convenient and secure way to pay for purchases above the contactless threshold. Other banks are also launching the biometric payment card with Thales, like Jordan Kuwait Bank and Pocztowy Bank.

The development of eco-friendly payment cards also reflects how banks are continually adapting their operations to become more sustainable. Many banks such as Triodos are now issuing recycled banking cards made from ocean plastic and biodegradable materials such as non-edible corn, with more banks set to follow.

As the Covid-19 pandemic shapes and transforms the payments industry, our payment habits will continue to change and diversify. Over time, this will lead to greater innovation in payment methods as banks adapt and respond to consumer demands.

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