The Covid-19 pandemic has brought another notable metric to the convergence of digital and physical commerce as more shoppers and retailers alike get used to the idea of contactless payments. For the first time, the use of digital and mobile wallets such as Apple Pay, Alipay, Google Pay and PayPal are exceeding cash payments in stores worldwide. Last year, cash payments dropped 32.1 percent and now account for only 20.5 percent of face-to-face payments globally.
The 2021 Global Payments Report by Worldpay from FIS said that the pandemic accelerated the decline of cash by more than three years, with 2020 totals exceeding the company’s previous projection for 2023. Digital wallets gained much of cash’s share loss at the point of sale, rising 19.5 percent over 2019 to represent 25.7 percent of 2020 point-of-sale transactions.
With the jump, mobile wallets also leapfrogged the usage of both credit cards (22.4 percent) and debit cards (22.3 percent) to take the top spot among in-store payments methods.
The U.S. is still lagging when it comes to deploying digital wallets at the point of sale, with credit cards (38 percent) and debit cards (29 percent) still taking up a big chunk of payments. While only 12 percent of in-store purchases are made with cash, this represents has a slight lead over mobile wallet usage, which ranks at 10 percent.
The survey of 46,000 consumers worldwide projects that by 2024, cash will account for less than 10 percent of in-store payments in the U.S. and just 12.7 percent of payments worldwide. Over that same time period, the report projects digital wallet payments to account for more than one- third (33.4 percent) of all in-store payments, while the U.S. still tries to catch up at 16 percent.
It seems inevitable that payments ended up going down this road, primarily due to the lockdowns, shelter-in-place orders and personal safety measures all implemented globally throughout the pandemic. In fact, 53 percent of global consumers surveyed by Worldpay from FIS said the pandemic made them more hesitant to use cash in store.
“Our new research shows that the world is entering a new phase of adoption of digital payment methods,” said Jim Johnson, head of merchant solutions at FIS in a statement. “The global pandemic has brought a cashless future closer on the horizon. The implications for merchants are profound. They must be building technology-centric strategies to meet the diverse preferences of consumers’ rapidly changing habits and do so in a way that drives financial inclusion for underserved communities around the world.”
The unease around cash has given way to the application of contactless payments throughout the entirety of the pandemic. Last May, a study from Mastercard that surveyed 17,000 consumers across 19 countries revealed that 79 percent of global shoppers said they were using contactless “tap-to-pay” payments, citing safety and cleanliness as key drivers.
As many as 82 percent of these shoppers viewed contactless, touch-free payment experiences as a “cleaner” way to pay at checkout, while another 46 percent had swapped out their preferred “top-of-wallet” card for one that offers contactless, the survey said. Seventy-four percent of consumers said they would continue to use contactless payments beyond the pandemic.
Asian retailers have the world beat
The Asia-Pacific region continues to be way ahead of the game in its adoption of mobile wallets at the point of sale, according to Worldpay from FIS, as 40.2 percent of in-store payments in that region are now being done through contactless payments, an increase of 12 percent over 35.9 percent in 2019.
The study projects mobile wallets to grow to represent 47.9 percent of in-store spend by 2024. China has already reached the 50 percent mark for in-store digital wallet payments, and will continue to lead the way with mobile wallets projected at 57.1 percent of these purchases in three years, while Taiwan, Thailand and The Philippines will all see mobile wallets experience dramatic growth rates of over 25 percent.
The use of mobile wallets has accelerated across all regions in 2020, albeit to a lesser degree, and now accounts for 9.6 percent of payment methods in North America, 8.3 percent in Middle East/Africa, 7.2 percent in Europe, and 6.4 percent in Latin America.
Cash’s grip on shoppers was already beginning to loosen worldwide alongside the growth of digital wallets, but 2020’s turbulence made the usage of the paper currency plummet even faster. In fact, the amount spent via cash transactions also reflected this across the board, by 21.9 percent in North America, 33.6 percent in Europe, 34.7 percent in Latin America and 36.6 percent in APAC.
Global e-commerce to exceed $7 trillion in 2024
The survey also examined e-commerce payments, indicating that online shopping posted a total of $4.6 trillion in transactions, a 19 percent increase from 2019. Like the shift away from cash spending in stores, e-commerce penetration accelerated by almost three years, calculating that total transactions jumping from 8 percent of retail in 2019 to 10 percent in 2020.
But the growth still isn’t done: Worldpay from FIS says that global e-commerce spending could reach $7.3 trillion by 2024.
Digital wallets remain the payment method of choice among global e-commerce consumers, accounting for 44.5 percent of online purchase volume in 2020, up 6.5 percent from 2019. In the U.S., digital wallets grew to represent 29.8 percent of e-commerce transactions, up 23.7 percent over 2019 levels.
By 2024, the report projects that digital wallets will account for more than half (51.7 percent) of all online payments worldwide, while “buy now, pay later” adoption will jump from 2.1 percent of transactions to 4.2 percent.