Banks Must Do More to Meet Contactless Payment Needs of Debit Card Users

Merchants had to be especially prepared for the 2021 holiday season, ensuring that they were offering the shopping and — above all — the payments experiences consumers were expecting online and in store. Consumers are rapidly flocking toward payment tools that can allow them to make purchases that fit within their budgets, meaning interest in debit and debit-supported payment solutions are on the rise. This is especially true amongst younger consumers, with one recent study finding 44% of Gen Z shoppers planned to make most of their holiday purchases via debit.

In the latest Next-Gen Debit Tracker®, PYMNTS examines how consumers’ debit payment preferences shifted during the 2021 holiday season, as well as what this means for future payment trends and needs. It also analyzes what tools and technologies could come to play a deeper, more critical role within the consumer debit payments space in the next several years.

Next-Gen Debit Developments Around the World

Many consumers remain concerned over their budgets or levels of debt — worries that led an increasing number of 2021 holiday shoppers to turn to debt-connected buy now, pay later (BNPL) options when purchasing gifts. One recent report found BNPL usage rose 29% year over year during 2021’s Cyber Week, representing a full 4% of U.S. sales for Black Friday alone. Such solutions enable consumers to break purchases into installments, making them attractive potential alternatives to credit cards. As such, they are seeing more interest from retailers and consumers as merchants look to capture consumers’ business.

Consumers are also shifting what channels they use to shop as well as their preferred payment methods, with a significant portion of 2021 holiday shopping taking place via virtual channels. For example, one recent study found 58% of consumers preferred mobile devices to conduct their shopping during the past festive season, compared to 47% of individuals in 2020. While consumers are not yet ready to give up entirely on brick-and-mortar stores, they seem to prefer brands that offer hybrid experiences that cater to their newfound preference for digital speed and convenience. Brands must be sure they are fine-tuning their payment options to keep customers satisfied as their needs and preferences continue to change.

For more on these and other stories, visit the Tracker’s News and Trends.

Commerce Bank on the Future of Mobile and Contactless Debit Options

Consumers and retailers are not the only entities paying closer attention to shifting debit trends. Financial institutions (FIs) are also looking at how their customers’ payment needs and preferences are shifting to ensure they can keep up with new demands and offer competitive features. This includes offering contactless spending options, explained Angela Finn, senior vice president and group product manager of debit and prepaid card products at Commerce Bank.

To learn more about how the contactless debit spending space is shifting and why FIs must pay attention, visit the Tracker’s Feature Story.

Deep Dive: Contactless Debit Cements Itself as a Preferred Spending Option

Retailers sought out multiple ways to stand out from the crowd during the 2021 holiday shopping season, including offering payment options that can offer more financial flexibility to customers. Reducing their debt or interest charges may be one reason consumer debit spending has continued to grow throughout the pandemic, especially among younger consumers who are seeking more transparency and control over their payments. Offering debit-connected BNPL options is one way retailers could gain advantages over their competitors.

Visit the Tracker’s Deep Dive to learn more.

About the Tracker

The Next-Gen Debit Tracker®, a collaboration between PYMNTS and PULSE, a Discover company, examines consumers’ changing payment behaviors, the innovations that are reshaping how they use debit and how advanced solutions like machine learning technologies can help financial institutions secure debit payments.