17 Jan 2021 Irish Payment Trends Demonstrate Consolidation of Cashless Preferences

The disruptive impact of the coronavirus pandemic’s emergence in 2020 on how communities function and businesses operate was immediate and unparalleled by any event in living memory.

While lockdowns and restrictions remained present in most countries through parts of 2021, semblance of normal life returned and gave the first signs of what societal changes, which had either emerged or been accelerated by Covid-19, would remain a mainstay in our everyday lives.

The rapid progress and marked utilisation of card, contactless and digital payment options was initially driven by the pandemic in 2020, with cash being deemed a perceived risk and the WHO encouraging shoppers to use contactless digital payments to limit the spread of the virus.

Yet, despite the declining impact of Covid-19 on everyday life in 2021, there were clear indications from consumer behaviour that the benefits and ease of cashless transactions had secured its permanence as a preferred payment option last year and was not just a temporary pandemic response.

This discernible change in behaviour by consumers and companies meant cash payments remained an industry outlier in 2021 with cashless payment options moving from accelerated growth in 2020 to consolidated preference in 2021.

Consumers remained digital payment natives

Visa’s Back to Business Study had highlighted in 2020 how consumers placed “COVID-19 safety measures at the top of their shopping lists and rewarding businesses that do the same.” Globally, the report noted that contactless payments were a driving differentiator with almost two thirds of consumers surveyed claiming they would switch to a new business that installed contactless payment options. Overall, the study found that 78% of consumers had changed the way they pay due to safety concerns.

In 2021, the popularity of cashless payment options continued to dominate as the industry norm with perceived ease of use and its benefits becoming the key driver rather than health concerns in a post-pandemic world.

BOIPA and EVO Payments’ research on Covid-19’s Impact on Payment Behaviours in European Countries last year, found that, when shopping in person, 34% of Irish consumers surveyed would use cash less often than before the pandemic and 40% plan to use contactless payments more often after it. This was evident with contactless payments reaching new heights in the third quarter of 2021 at almost 234 million payments worth nearly €3.8 billion.

The increase of the contactless limit on physical cards to €50 last year helped galvanise the popularity of its use with consumers and businesses as well as consumers’ growing familiarity with Google and Apple Pay ‘card-free’ contactless payments, moving physical cards into a digital wallet on our phones, watches or tablets. The ease and simplicity of online person to person payments, with apps like Revolut and N26, has continued to further our journey away from traditional cash scenarios too.

It’s also expected that Irish shoppers use of card payment and mobile wallets for online shopping will continue to grow.

 “It seems that in Ireland usage of traditional card payment and virtual wallet while shopping online will still be the most popular and popularity of these payment methods will grow faster after the pandemic than in other European countries. Additionally, there is potential for growth in the popularity of paying using a card connected to a mobile app.”

EVO Payments European Research, 2021

It is also worth noting that a cashless first approach has been maintained across all age demographics in neighbouring UK with 93% of over 65s, a group often defined as being more cash traditional, say they now use contactless payments in stores with debit and credit cards.

Merchants and issuers embraced new payment options

The growing number of payment options offered to customers in 2021 reflected businesses and the financial technology sector’s ability to adapt to new normal expectations.

The seamless switch from cash to digital transactions has raised customer expectations of payment options from businesses of all sizes, with the preference from customers to favour businesses with card and contactless facilities noted by Visa in 2020 remained prevalent last year with card/cashless payment methods proving especially important in hospitality, groceries and offline retail as well as in other sectors.

Card/ cashless payments options also gave Irish consumers the perception that businesses with card or digital payment options are keeping pace with current technology.

With many businesses reopening fully for the first time in 2021, we saw how sectors adapted effectively by choosing from the multitude of tailored options to support their business with, for example, sole traders like taxi drivers and tradespeople utilising mobile payment acceptance devices and larger retail outlets with integrated and omni-channle payment solutions merging in-store and online connectivity.

Sector-specific digital payment software solutions has also played a part in streamlining and optimising transactional journeys for businesses and their customers, from, for example, appointment scheduling through to billing.

We will continue to see these responses to consumers’ needs and expectation too, with KPMG’s research into a digital future noting how organisations are accelerating digitisation to create seamless digital customer experiences, develop additional channels to reach and serve customers, and adapt to changing market conditions.

“Customers have clearly adapted to new, seamless digital interactions and business models and expect these to continue to improve, enabling an orchestrated and consistent customer experience: from browsing and purchase through to delivery, then payment and service.”

Forrester Consulting on behalf of KPMG, 2021

Response to the threat of online fraud

The rise and consolidation of card, contactless and digital payments has also been met with an increase in cybercrime over the past 12 months. In Ireland, fraud increased by 72 per cent in the 12 months to September 2021, compared with the previous 12-month period with the third quarter of last year setting a record for reported fraud incidents. Between July and September, 4,171 incidents were reported, more than double the amount reported in quarter three of 2020.

The impacts of online fraud to any company’s finances and reputation with A third of consumers surveyed by Visa last year admitting they’d stopped shopping at a store or with a brand due to a fraudulent charge appearing in their account.

The acknowledgment and response to online fraud has been strong. Microsoft’s latest survey on the transformative impact of digital technology in Ireland found that 53% of leaders in the financial technology sector claimed security was the biggest digital tech challenge.

The finance and banking industry continued to respond to it with the implementation of PSD2 SCA, a robust solution that offers greater security by ensuring that electronic payments are performed with multi-factor authentication.

As with any new technology, it may take time for cardholders to become familiar with the process. However, over time it is expected to increase consumer confidence in buying on-line and reduce fraud with increased consumer confidence in an e-Commerce environment.

This consolidation of card, contactless and digital payments preference in Ireland, as well as industry’s response to online fraud, has set the foundation for the financial services industry to continue to support fluid and exceptional customer experience with more exciting trends to come in 2022.