Viewpoint: Emerging Payments Vs. Legacy—It’s Not Either/Or
By Teri Llach, Blackhawk Network
Cash and plastic cards—including prepaid—aren’t going anywhere anytime soon, but (unsurprisingly) there’s also a place for emerging payments to play in the sandbox.
For Blackhawk Network’s recently completed consumer study, “How America Pays in 2015: Traditional, Digital and Mobile Convergence in Payments,” we surveyed more than 1,000 Americans about their payment preferences. The key trend that emerged: Traditional and emerging payments tools are being used together, not cannibalizing each other.
Our findings indicate that traditional payments methods—including cash, credit and debit cards and checks—are still the most used. In fact, over the past year 93 percent of people used cash, 68 percent used debit cards and 68 percent used checks. However, when asked how they used payment tools this year compared to last, cash and checks also showed the greatest declines in usage, while 68 percent of users of alternative payments, including mobile wallets, Apple Pay, wearables, or bitcoin, report that they’re using these alternative payment methods more than last year. In other words, consumers want a variety of payment options.
Preference for Prepaid
While still a relatively young payment tool, prepaid is more established compared with emerging digital payments technologies, such as mobile wallets and bitcoin. Our consumer research demonstrates prepaid’s significant foothold in the payments landscape: 87 percent of consumers surveyed think merchant-specific gift cards are convenient to use, ranking higher than bank-connected debit cards (82 percent). Additionally, gift cards are a mainstream payment method with almost half of consumers (48 percent) using them in the last year.
We also found that 33 percent of consumers used prepaid debit in the last year, and 30 percent of consumers used prepaid debit cards more this year versus last. Prepaid debit cards also are considered convenient by 78 percent of Americans.
Perhaps most importantly, we found that prepaid and other more traditional payments methods have not diminished in value to consumers, but rather complement emerging technologies. For example, the survey shows that mobile wallets are now used by 25 percent of smartphone owners, who use them to store their debit (64 percent), credit (58 percent) and gift cards (45 percent).
What This Means for the Future
Today, consumers want options and convenience when paying and that means using a combination of traditional and new payment tools. At this stage, mobile technologies, in particular, can help enhance the traditional payments experience, but they’re not quite there in terms of functionality. For example, a mobile wallet could enable consumers to combine all of their spending power in one place, giving them the ability to store credit and debit cards, gift and prepaid cards and loyalty points and coupons. A mobile wallet that only makes credit and debit cards mobile may not be enough of a value-add. Consumers don’t struggle with carrying those small items. It’s the voluminous amounts of other spending and budgeting tools—loyalty cards, gift cards and coupons— that often don’t make it into a physical wallet.
Consumers will continue to add to their payments toolkit to include a number of different options—one of which may be more convenient than the next depending on the scenario. For instance, an individual may test drive a P2P platform, like Venmo or PayPal, to pay a friend who lives far away. While this may have been the best option for paying a faraway friend, in other scenarios he may prefer paying cash or via check. Similarly, an individual may decide to use the Apple Pay feature on his phone at a favorite retail store. However, that form of payment may prove useless at the next store if the retailer doesn’t accept Apple Pay.
Convenience is driving consumer behavior in payments. Ultimately, the process of unifying all POS terminals may impact consumer preferences in the future but in the meantime, consumers will continue to make payments decisions on a case-by-case basis.
This research imparts some important directives for the prepaid industry: There are inherent opportunities and limitations of emerging versus traditional payment methods, and today consumers want a complementary mix of both. Savvy prepaid companies should continue to offer a seamless and convenient experience for the legacy, physical card products while simultaneously integrating and discovering complementary digital, mobile and virtual features that will add convenience to the consumer’s experience with prepaid.
Teri Llach is chief marketing officer at Blackhawk Network, a Pleasonton, Calif.-based prepaid and global payments company, which supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels. Teri can be reached at [email protected].
In Blogs & Viewpoints, prepaid and emerging payment professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.