The report: 2024 State of Payments Report
Source: Marqeta
Why we picked it: The trends towards digital and contactless payments — especially among younger generations — has the potential to directly challenge the traditional banking model. The growing appeal of non-traditional financial services providers still threatens market share, while the data on customer loyalty underscores the need to innovate our retention strategies.
Embedded finance and P2P payment providers particularly present both opportunities and threats bankers can’t ignore. Moreover, the insights on economic pressures affecting consumer behavior and increasing fee sensitivity are vital for banker’s risk management and pricing strategies.
Executive Summary
Marqeta’s 2024 State of Payments Report underscores the strong momentum towards digital and contactless payments in the banking industry, particularly among younger generations. It highlights the even-faster growing comfort with digital payment methods, with many consumers increasingly relying on mobile wallets and contactless payment options for their day-to-day transactions.
If anything, these trends are defining the face of consumer loyalty, and reinforces the embedded finance wave. Good experiences and brand alignment are key drivers of loyalty, but the study finds that loyalty is becoming increasingly fragile in the face of expanding options. P2P payment apps are gaining significant traction, evolving from simple transfer tools to more comprehensive financial platforms. Additionally, there’s growing interest in innovative payment models like Accelerated Wage Access — especially among gig economy workers and younger employees.
Economic factors are also shown to be influencing consumer behavior, with many consumers facing financial challenges and becoming more sensitive to fees. The report notes varying trends in savings and retirement accounts across different countries.
Key Takeaways
- The great digital payments convergence is happening: Consumers, especially Gen Z and Millennials, are showing a strong preference for modern payment solutions and embedded finance offerings.
- Consumer preference for frictionless integration is driving adoption: 96% of consumers have at least one card in their mobile wallet, and 62% feel confident enough to leave their physical wallets at home.
- Loyalty is driven by identity and good experiences: Over half (57%) of consumers report that good experiences and feelings are the primary reasons they stay loyal to their favorite brands. High-quality products and services (48%) and brands matching their identity (24% in the U.S.) also play significant roles in fostering loyalty.
- The rising power and relevance of P2P payments: Seven in 10 consumers have used a P2P app, with usage rates highest in the U.S. at 77%. These apps are evolving from single-purpose tools to more comprehensive financial platforms.
Is A Cashless Society the New Banking Reality?
Do you want the good news or the bad news first? We’ll start with the good news.
The doom and gloom facing traditional banking are potent, but consumers still using cash are bolstered by a degree of loyalty to legacy financial institutions. Almost two-thirds (64%) of consumers said they have used their primary bank for six years or longer. The report also found that consumers are hedging their bets when it comes to where they keep their money: Three out of five of consumers keep more than half their money with their primary bank. Older generations are the ones more likely to spread their money around, with 34% of consumers aged 65 and older keeping just a quarter or less of their money with their primary bank.
60% of consumers also still reported using cash in the last week, the safe zone belonging to traditional banks and credit unions. Cash still plays a significant role in many consumers’ financial lives: a key reminder to all businesses and financial institutions to be prepared to cater to both preferences in the near term.
Now, for the flip side of the coin.
For starters, the transition to a cashless society — albeit slower than expected — is still ongoing. In the U.S., 31% of consumers reported using cash less than they did 12 months ago. Nearly three-quarters (71%) of U.S. consumers expressed no concerns about moving to a cashless society, with 28% even reporting feeling awkward when paying with cash. This sentiment is especially strong among younger consumers, with 49% of those aged 18 to 34 feeling uncomfortable using cash.
To top it off, one-third (34%) of consumers said they use a digital-only bank in addition to their primary bank, indicating a growing openness to non-traditional financial services and mobile banking offerings. In the U.S., 18% of consumers would consider moving all their banking to a digital-only option, while 78% already use at least one additional financial provider outside their primary bank. Nearly half (46%) of global consumers have already changed their primary bank, with an additional 17% considering doing so.
This trend is particularly pronounced among younger consumers, with 63% of U.S. consumers aged 18-34 saying they would consider getting financial services from non-traditional providers such as tech companies, social media platforms or retailers.
Would you like to learn more about the consumer loyalty findings from Marqeta’s report? Check it out here.
Embedded Finance Further Infiltrates Payments
The findings above contribute to the popularity of embedded finance and the integration of financial services into non-financial platforms and apps, further showing how consumers are drawn to seamless, convenient financial experiences that blend seamlessly with their daily lives.
This trend is evident in the rising popularity of P2P payment apps. Nearly eight in 10 U.S. consumers have used a P2P app. These apps are evolving from single-purpose tools to more comprehensive financial platforms, with roughly half of consumers using their P2P app for additional services such as credit cards, debit cards and bill pay.
PayPal remains the most popular P2P app across the world. In the U.S., Cash App is the second most popular P2P payment app, with 53% of consumers reporting they’ve used it, followed by Venmo (45%) and Zelle (39%).
However, an area where embedded finance is making significant inroads — and the most underrated — is in the realm of payroll. The report highlights growing interest in Accelerated Wage Access (AWA), especially among gig economy workers and younger employees. But it’s popular with just about everyone. 87% of all U.S. consumers surveyed are attracted to platforms that offer instant pay options. Of those who get paid immediately, 90% said receiving their earned wages instantly makes it easier for them to plan their finances.
This trend is particularly relevant given that more than three in five Americans live paycheck-to-paycheck.
For employers, offering AWA can be a powerful tool for attracting and retaining talent. The report found that 89% of consumers said the option to get paid immediately increases their interest in an employer, up from 72% in the previous year’s survey.
The gig economy is playing a significant role in driving this trend. Nearly a quarter (24%) of U.S. consumers surveyed consider themselves part of the gig economy, a number that swells to over one-third among 18- to 34-year-olds. Within this cohort, more than three-quarters (77%) are living paycheck-to-paycheck.
The Future of Payments: Trends and Implications
As we look to the future, several key trends emerge from the report that will likely shape the payments landscape in the coming years:
1. Continued growth of contactless and mobile payments: The rapid adoption of contactless and mobile payment methods is likely to continue, particularly as younger, tech-savvy consumers gain more purchasing power.
2. Embedded finance’s growth and rise: The integration of financial services into non-financial platforms will likely accelerate, offering consumers more seamless and convenient ways to manage their money.
3. Increasing importance of instant payments: The growing demand for Accelerated Wage Access and the popularity of P2P payment apps suggest that consumers will increasingly expect instant or near-instant payment options.
4. Evolving loyalty dynamics: As consumers become more willing to switch financial service providers, companies will need to focus on delivering excellent experiences and compelling value propositions to maintain loyalty.
5. The tricky balance of traditional and digital services: While digital financial services are on the rise, many consumers still value traditional banking services. Financial institutions will need to find the right balance to cater to diverse consumer preferences.
6. Growing sensitivity to fees: With consumers becoming more fee-averse, financial service providers and merchants will need to carefully consider their fee structures and communicate value clearly to consumers.
7. Personalization and data insights: As financial services become more integrated into consumers’ daily lives, the ability to leverage data for personalized offerings and insights will become increasingly important.
Editor’s note: This article was prepared with AI language software and edited for clarity and accuracy by The Financial Brand editorial team.