Wednesday, February 9, 2022 4 minute read

Restrictions Lifted & Payments Shifted: A Payment Landscape Snapshot

Wednesday, February 9, 2022 4 minute read

4 minute read

Three weeks have passed since the government announced the most significant and swift easing of restrictions since the pandemic began on the eve of St. Patrick’s Day in 2020.

As the economy enters an expected period of increased consumer spending, it is worth noting the permanent change in consumer behaviour in how they now make in-person transactions and the increased frequency of online shopping.

Before the start of the first lockdown, going back even 7 or 8 years ago, there had been key things that we needed cash for like taxis or paying adhoc school bills for kids or paying tradespeople.

Gradually over time, we have seen the widespread adoption of new payments products and solutions suitable for businesses across all sectors and sizes.

The pandemic transformed this growing ripple of change into a wave of transformation and how people paid in January 2020 is very different to how they pay now.

In-store card payments jump in popularity.

Italian Restaurant Bits & Pizzas. Pizzas and card payment

Image: Restrictions

Based on our own European-wide research last year, just over 50% of people interviewed last year stated they started to pay with card/cash-free more often due to the pandemic with 55% believing cash is more unhygienic than other payments methods in Ireland. Almost half of consumers surveyed claimed they are now card first.

While it might have been difficult to run a business without a card terminal in 2019 and early 2020 for in-person transactions, it is now significantly less viable to operate without one.

The latest figures from Banking Federation Ireland reveal that card spend at point of sale terminals accounted for €6bn euro worth of transactions in November 2021. That’s a jump of 54% compared to November 2019, with cash withdrawal from ATM’s slipping by 27% when comparing the same periods. This supports the evidence that cash usage has halved over a three year period.

Use of contactless is now almost universal and frequency of use has increased

The value and volume of contactless transactions too continued on an accelerated upward scale throughout the pandemic.

Data showed that we spent over €31 million per day in September 2020 when tapping and the average of the value per tap increased by almost €3 compared to the September before the pandemic started. This trend continued with 25% year on year increase in contactless payments recorded last September.

There were 100 million more taps in between July and September last year compared to the same period in 2019, amounting to a monetary increase of €2 billion. The increase on the contactless limit from €30 to €50 undoubtedly boosted contactless’ popularity.9 in 10 people have used contactless with 4 in 5 now using it daily.

The move to digital wallets is the next big shift

With consumers becoming more accustomed to contactless payments, this has helped fuel the growth of digital wallets – the ability to pay on your phone or on a wearable device using a debit or credit card embedded in a digital wallet. While the figures show that they are mainly being used for lower value transactions, the contactless limit of €50 is not required given the security features on these devices.

There is huge potential for consumers to begin relying more on their phone rather than their card for the full spectrum of purchases and we’re seeing the next shift in growth with physical cards disappearing into the digital wallet as more people pay securely and conveniently through their device.

Online shopping growth

Image: restrictions 2

Over half of customers we interviewed last year felt the pandemic had encouraged them to buy online and 37% claimed they will continue to buy more online after it. The evidence backs this up with a quarter of people shopping online weekly and around 75% of people making online purchases monthly.

Because of this change, we’ve seen online card payments jump by 80% when comparing November 2019 to November 2021, moving from €1.5 billion to €2.7 billion. It’s important to acknowledge the growing potential and need for Irish stores to trade viably online, with Revolut noting that while 70% of spending on Black Friday went to Irish owned stores, foreign stores dominated in online sales.

Customers’ expectations have adapted with the rise of technology supporting new payment options like pay-by-link, social commerce on platforms like Facebook and Instagram (who have recently added a click through website to their stories function) and peer-to-peer payments.

These options raise the very real prospect of a solely card-first generation on the horizon as children growing up may never know almost what cash is with a limited experience to it as they become young adults.

There is now both a challenge and opportunity for your business to meet these realities.

Cash remains part of the payment mix

Fifty Euro Note with coins

Despite the step-change to cashless payment preferences, it would be inaccurate to predict the disappearance of cash from everyday commerce.

Rising transaction fees and a growing number of shops’ reluctance to accept cash, along with a growing consumer awareness of the benefits of card, contactless and digital payment options, will certainly continue to reduce cash usage. Nevertheless, it still has a role to play, particularly for items valued under €15. There is still a place for the traditional savings account for young children. There are digital alternatives to this but it remains a popular route for many parents.

Sweden, a country leading the way in customer preference for non-cash payments, have demonstrated that cash will maintain a role, passing legislation in 2020 to preserve an adequate level of cash services.

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