Trends, Changes and Shifts in Digital Payments

Subscribe TodayAs online commerce grows and consumers continue adopting digital payments, more merchants and consumers are also turning away from cash. One-in-five (20%) consumers say they currently are not carrying any cash in their wallet, and nearly half (46%) say they rarely or never use cash for making purchases. This has not gone unnoticed by merchants: among those that currently offer cash/check payment options to their customers, two-thirds say they are very (36%) or somewhat (31%) likely to go completely cashless.

It’s clear consumers are increasingly relying on digital technologies to make their purchases. More than 70% of online shoppers say they have used digital-payment services, including mobile wallets, one-click checkout buttons and P2P payment apps. Four-in-ten (41%) say they “always” or “sometimes” use such digital solutions when they pay.

The findings are based on a survey by American Express about digital payments trends and online shopping habits. The study included over 1,000 U.S. consumers 400 U.S. merchants, and explored differences between consumers’ behaviors on desktop computers vs. mobile devices.

Nearly half of online shoppers in the study (47%) say they have increased the frequency of their online purchases in the last year. At the same time, 71% of merchants say the proportion of their annual sales generated through online and mobile channels has increased over the previous year.

The results show that merchants and consumers are increasingly conducting commerce through digital channels, a trend that will undoubtedly continue to grow in the next 12 to 24 months.

Internet-connected, voice-activated devices, are also poised to further shape consumer purchasing behavior. 18% of consumers surveyed say they are very likely or somewhat likely to use voice-activated services to make a purchase in the future. With industry estimates predicting a surge in internet-connected devices in the coming years, the number of consumers who may ultimately use such gadgets to make a purchase is likely to grow in the future.

Security Concerns About Digital Payments Trouble Consumers

While consumers are doing more of their shopping online, they also place a high priority on payment security. Of consumers who have made three or more online purchases in the last year, nearly four-in-ten (37%) say they have abandoned an online purchase because they did not feel their payment would be secure.

At the same time, 73% of merchants say their level of fraudulent online sales has increased or remained the same over the past year. This suggests that while consumers are increasingly shopping online, merchants have an opportunity to capture a larger share of their customers’ online spending by taking steps to reduce fraud and enhance security in their digital channels.

The survey found that investments in online security yield tangible benefits. Among the 71% of merchants that have experienced an increase in online and mobile sales over the last year, more than half (58%) say that enhanced security features have had a very significant impact on their sales. Other factors that have had a very significant impact on their sales include an improved checkout process (54%), the availability of free delivery (55%), marketing offers and discounts exclusively for online customers (53%), and a general consumer shift toward online shopping (54%).

Nearly eight-in-ten (79%) consumers who say they would be more likely to purchase an item in-store rather than online say an offer for free delivery would cause them to reconsider and purchase the item online instead.

Similarly, 75% of consumers say discounts available only for online purchases would prompt them to purchase online instead of in-store, while 50% say the ability to earn exclusive rewards for online purchases would prompt them to do the same.

According to the findings, many merchants are prioritizing security investments. In the past year, merchants spent 31% of their IT budgets on payment security. In addition, more than half of merchants (54%) report that their budget for payment security will increase over the next year.

But there are additional steps that more merchants can take to boost security in digital channels. For instance, only about half (53%) of merchants take the simple step of requiring customers to enter the CVV code found on credit cards for online purchases. An even smaller percentage of merchants say they utilize technology to help confirm customers are not robots (42%), and utilize data encryption for their online channels (40%). Just four-in-ten (39%) merchants decline transactions when a verified billing address has not been provided.

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