The last 18 months have been nothing short of disruptive for retail and eCommerce. Consumer shopping behaviours saw an unprecedented shift, with the rapid turn to digital channels set to stay for the long run. In the fourth and final chapter of the New World, One Market report, we examine consumer behaviour post-pandemic, zeroing in on new payment preferences. The latest instalment of our consumer research chapter reveals stark differences in attitudes to payments among generations. It also sheds light on the potential economic contribution of trends such as subscriptions, digital wallets and cryptocurrency payments.
Younger generations are fuelling the subscription economy
More than a quarter (29%) of respondents said they took out more subscriptions in 2020 versus 2019, with an average spend of £25.32 per month equating to £304 per year. Subscriptions could therefore be realising a total of up to £20.39B per year for all British consumers.
From a demographic standpoint, this trend was driven by younger groups. Gen Z and Millennials took out an average of 2.1 and 1.75 subscriptions last year, respectively, compared to just 0.55 for Baby Boomers. Gen Z also spent the most on subscriptions with a monthly average of £31.46 (£378 annually), followed by £28.52 (£342 annually) for Millennials, £20.52 (£246 annually) for Gen X and £16.22 (£195 annually) for Baby Boomers.
Respondents from Greater London had taken out the most subscriptions per individual over the last year, with 2.06 on average, followed by those in the West Midlands with an average of 1.66, and those in the South East with 1.46.
Digital wallets take centre stage
Our research showed that PayPal was the preferred online payment method for over a third of UK consumers (34%), rising to 46% of Gen X respondents and dropping to 24% Gen Z. Debit cards were a close second for consumers (33%), followed by credit cards (19%).
11% of Gen Z, 5% of Millennials and 6% of all respondents listed digital wallets as their preferred payment method today. When asked how people expect to pay online in five years, almost one in six (15%) of Gen Z and just over one in ten (11%) Millennials thought digital wallets would be their go-to method, with 10% respondents across generations. Consumers clearly demonstrate a considerable preference for digital wallets over the coming years.
Paying with cryptocurrencies also saw a rise in popularity, with 4% of all age groups expecting to use it as a preferred payment method in five years, versus 1% today. That could equate to as many as 2.68 million people nationally, or £4.4 billion in online payments being made by cryptocurrency in the UK annually, by 2026.
Today's top three most popular payment methods (PayPal, debit cards and credit cards) are all set to decrease in popularity, with debit cards dropping the most, from 33% today to 28% in five years.
Buy now, pay later on the rise
Buy now, pay later (BNPL) is another popular payment method among consumers, with 37% saying the service encouraged them to buy. 45% of Gen Z and 46% of Millennials said that they were more likely to be encouraged to buy through BNPL. By contrast, only 31% of Gen X and 12% of Baby Boomers felt that BNPL encouraged them to make a purchase. These findings could suggest changing attitudes regarding buying on credit, with a more positive reception from younger consumers.
Of the shoppers who said they were more likely to return to the high street to shop following the pandemic, 50% said that BNPL would encourage them to buy. This finding highlights the importance of offering a broad range of payment options, including BNPL, both online and in-store. People in London were most likely to be encouraged by BNPL (45%), followed by respondents in the North West (41%).
Angus Burrell, SVP Retail at emerchantpay, said: “With so much competition online and, as we’ve seen from previous report chapters, speed and efficiency playing such an important role in encouraging people to buy, the payment methods that merchants offer can be the difference between a sale or a fail.”
With this changing landscape at front of mind for retailers and consumers alike, now is the time to plan ahead and ensure your commerce strategy is ready for the golden Q4. Retailers and eCommerce businesses who do so will be best placed to inspire customers and drive sales during the most crucial period in the 2021 retail calendar and beyond.
New World, One Market arms you with data-driven insights and an extensive comprehension of consumer behaviour to help you achieve your business goals. Whether you’re looking to revamp your existing customer journey, optimise your payment strategy or make a game plan for the festive period, this report has you covered.
Get in touch to discuss how you can adapt your payment strategy to 'the new normal' and design a seamless payment journey, both online and in-store.