The permanent rise of contactless payment
For many, contactless has suddenly become the preferred payment method when shopping in physical stores. The World Health Organization recommends using NFC contactless cards and mobile wallets whenever possible, and consumers seem to be taking those recommendations to heart. One study found that 30% of consumers have started using contactless payment methods since the pandemic began—and a remarkable 70% of these new users plan to continue using them post-pandemic. Mastercard© saw similar results in their own findings, with nearly eight in ten customers using contactless payment methods and 74% planning to use them in the future. It’s safe to say that contactless payment is here to stay, as consumers realize its convenience beyond hygiene concerns.
One industry responding to the contactless trend is grocery stores. Store franchises in the U.S. like Sam’s Club and Kroger, who already had apps in place before the pandemic, have seen a huge increase in users, while other stores scramble to set up their own contactless payment systems. These efforts are being encouraged by governments around the world. The UK’s leading trade association, the British Retail Consortium, is making it easier for British consumers to use contactless payment by introducing new rules that increase their spending limits. A similar change in Germany has resulted in 43% of Germans surveyed reporting that they have changed their payment behavior.
Retailers find hope in BNPL solutions
While contactless has become the preferred payment method for consumers shopping in-store for essentials, BNPL solutions have seen a spike in users in digital retail. BNPL companies such as Klarna, Afterpay, and Affirm have all reported an increase in users purchasing in categories relating to lockdown: kitchen appliances, home office supplies, home improvement, and sports equipment. The control and predictability that installment payment offers has become especially important at a time when many consumers have partially or completely lost their income.
BNPL solutions have seen a steady increase in users for years, especially among millennials and Gen Zers. One report found that 67% of millennials use the BNPL option at checkout. The sudden freeze on economies across the world has only increased their use of the alternative credit over traditional options. This is especially clear to see in retail categories that have seen an increase in sales during the pandemic, such as home sporting goods.
Since fitness centers have been forced to close their doors, many consumers have turned to investing in home gyms and equipment to stay active. However, paying outright for expensive items makes most consumers uneasy during times of financial instability. In one report, 30% of BNPL users claimed that they would not have made some purchases without a financing option. This mentality has led to Affirm, for example, reporting a 163% sales increase in home fitness brands like Peloton and Mirror in the last couple months. Other brands, for example Gymshark, have boosted sales success by partnering with Klarna.
Like contactless, BNPL solutions are here to stay. In fact, a recent study by FIS found that BNPL will be the fastest online payment method by 2023. The changes consumers are making to their payment behavior now could certainly become the norm in the post-pandemic world. The unusual situation consumers find themselves in appears to have been just the push they needed to adapt to the faster, more convenient payment methods of the future.
