Pandemics and Digital Adoption – a WEIRD View

Pandemics and Digital Adoption – a WEIRD View

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As consumers forgo credit cards and turn to BNPL, discover what is driving the surge in consumer interest. Uncover all the insights in this exclusive snapshot report on the future of UK BNPL.

At RFi we collect a plethora of consumer insights every month, providing us with an invaluable outlook into the changing landscape of banking and payments around the globe. This affords us a perspective of the market that we use to understand how things will be in the future.

Logically then, as we edged into the pandemic last March and witnessed consumer attitudes and behaviours shifting dramatically, we were keen to understand which of these changes would be long-term and which may be temporary, particularly regarding digital aspects.  Now, in June 2021, we have more than a year of data that details the shifts in digital consumer behaviour.

For this blog, I am going to focus on WEIRD economies. These are the societies that are Western, Educated, Industrialised, Rich and Democratic. I like it in this context because our digital adoption and usage in markets like Canada, the US, the UK, France and Australia are very different and driven by a variety of factors in comparison to countries like India, China and Indonesia – I’ll focus on these economies in another blog post.

Digital acceleration! Is this the death of the branch?

One of the most significant and least surprising shifts necessitated by movement restrictions and lockdowns has been channel usage. The long-term shift to digital is evident, but 2020 saw a step-change in mobile banking, which we believe will become the predominant banking channel over the next few years. Over half the population in our WEIRD societies now engages with their MFI via mobile on at least a monthly basis.

Branch saw a necessary decline, but while on average fewer than one in three consumers is using a branch monthly, we expect that at least 1 in 5 will also be visiting a branch on a monthly basis. Why is this? Humans are creatures of habit and our behaviours are often entrenched. In this sense, branches are traditionally an ingrained channel. In addition, many of the tasks we perform in a branch are either not available ubiquitously through other channels or are not well known to customers.

RFi Group’s Global Digital Banking Survey - Branch Usage Data 2021

Source: RFi Group’s Global Digital Banking Survey  

Is cash still king or will cards steal the crown?

Sometimes consumers have to be encouraged to change their behaviour before we see any step change. We saw this case firsthand with cash through 2020. Ultimately, an environment in which we are asked to wash our hands in alcohol in every shop is not conducive to handling cash. As a result, regular usage of cash in our Global Digital survey dropped by an average of 17% from 2019 to the end of 2020 across our five markets of focus.

So, is this the death knell for cash? Not in the short to medium term. In 2021 we will see a small rebound followed by a return to long-term downward trends for cash usage, but by 2025 we still anticipate cash to be a regular feature of consumer payments in these markets for more than 20% of consumers.

RFi Group’s Global Digital Banking Survey - Cash Usage Data

Source: RFi Group’s Global Digital Banking Survey   

The beneficiary of the cash decline in 2020 was the physical card. In the UK, we saw regular debit card usage grow by 5% over the 2019 to 2020 period, while in Canada, regular credit card usage grew from 64% of consumers to 71% over the same period.

At the same time, as card usage increased, our research illustrates a tick up in contactless usage. Australia has long led the way in contactless card usage but had seen it plateau in 2018 and 2019 at 70% of the population. 2020 saw this proportion jump to 86% as consumers sought to minimise contact with payments in as many ways as possible.

This knock-on effect has also been seen to an extent in the perennially underperforming world of mobile wallets. However, the jumps are less meteoric, with regular mobile wallet usage still something of an oxymoron for the large majority of WEIRD consumers. The UK led the way with regular usage at the end of 2020, but with 11% of consumers fitting this criterion, there is more to be done before Apple Pay and Google Pay and their ilk win over the payments landscape.

Success in the payments world is underpinned by three pillars: speed, convenience and security. If consumers feel like their current payment preferences fulfil these three criteria, it will be hard to shake this behaviour to any large extent. Mobile wallets have discovered this the hard way in recent years.

Tried and trusted or new and shiny?

With these changes in channel and payment behaviour, it should come as no surprise that we have also seen shifts in the extent to which WEIRD consumers are willing to use a digital-only provider for their main financial institution (MFI).

Banks are the most trusted institutions for consumers when it comes to keeping their data safe. Globally, when we ask consumers to share the extent to which they trust certain types of organisations in this regard, banks come out on top.

So, does this mean that if you are a traditional bank, you have no threat to worry about from NEOs or fintechs? Unfortunately not. To demonstrate my point, in our WEIRD societies, the proportion of consumers that would be comfortable with a digital-only provider sat at 42% at the end of 2020, up from 37% at the end of 2019.

RFi Group’s Global Digital Banking Survey - Digital Only Providers Use

Source: RFi Group’s Global Digital Banking Survey  

Why are we seeing greater comfort with these providers? In the words of the consumers, they are becoming familiar with digital brands, which will breed comfort with usage, and in turn, breed trust.

The new normal?

So, what’s the outlook? Longer-term banking and payments trends will be determined by the extent to which any new behaviours become habitual. This happens when consumers use a new thing and like it.

  1. We use the new way once
  2. We like the new way
  3. We are presented with opportunities to use the new way again (and again)
  4. We continue to use the new way at the expense of the old way

According to the experts, habits take anything from 21 to 254 days to form, depending on what source you believe. It has now been well over a year since the pandemic first hit and comfortably more than 254 days, so it’s a fair bet that many of these changes will become permanent.

One thing is certain, we’ll continue to see digital adoption; we’ll continue to see electronic payments rise in popularity and we’ll continue to see digital-only products and services pose a threat to the traditional. To date, traditional players have been able to rely on trust, but circumstances are causing consumers to try new things. Trust is important; however, trust is not static. Should digital players act on these insights, this may be the premise on which they’ll have the opportunity to deepen relationships and build trust, perhaps one day leading them to stand on equal footing with traditional providers.

In the next few weeks, RFi Group will be shining more light on digital innovations across the banking industry. I’ll continue sharing more insights on drivers, adoption, open and mobile banking to name a few. Until then, why not watch my take on the effect of digital acceleration on consumer behaviour.

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