Monday, June 10, 2024
A new survey from the Federal Reserve revealed the use of digital wallets products developed by nonbanks surged 32 percent last year vis-à-vis 2022, outpacing growth in mobile apps (at 8 percent) and debit cards (5 percent).
Just over 2,000 consumers across multiple generations were queried for the Fed's survey.
Younger consumers in particular are embracing digital wallets and paying bills using their mobile phones, the Fed found. More than half of Generation Z (defined as those Americans between the ages of 18 and 25) and millennials (between 26 and 41) now use digital wallets, and 80 percent indicated it's important to be able to make payments using their mobile devices.
Continuing the trend that began during the Covid-19 pandemic, ecommerce continues to grow, accounting for 15 percent of all U.S. retail commerce, up from 6 percent 10 years ago.
Two out of every 10 purchases, whether online or in person, are made using digital wallets, the Fed reported. And as more consumers become accustomed to using digital wallets online, they are also doing so in person.
Gen Z's use of digital wallets, for example, grew 32 percent, year-over-year (from 25 percent to 33 percent between 2022 and 2023). Among millennials the growth was even more pronounced at 45 percent (growing from 20 percent to 29 percent).
However, fraud remains a key factor influencing consumer choice and a key differentiator in choosing payment services providers. More than half (54 percent) of consumers surveyed said they had concerns around fraud; 16 percent of respondents using mobile or digital payment options have encountered fraud in the past year. They also said they expect their preferred providers to take the lead in mitigating payments fraud.
Yet, cash and credit cards remained the top two most frequently used payment methods, at 76 percent and 69 percent, respectively, followed by debit cards (66 percent) and ACH (56 percent), the Fed reported.
"Consumers are mostly intent on using payments that are convenient, easy to use and efficient," the Fed wrote in its insight brief, Banking my way – Gen Z and millennials are driving change in payments.
In terms of pain points, 45 percent of participants in the study cited fees, 25 percent pointed to challenges with speed and 18 percent mentioned processing errors.
The faster, mobile and instant payment use cases that consumers identified as most beneficial include:
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