By Patti Murphy
ProScribes Inc.
As we approach the three-year mark in the COVID-19 pandemic, it's clear that consumer shopping and payments preferences have changed significantly. Trends like contactless and mobile, once also-rans in the race to merchant checkouts, are making real inroads. And while consumers may be making fewer purchases with cards and mobile wallets, average tickets are growing.
Last month the Federal Reserve released an update to its oft-quoted payments study. Among the findings: consumers are using their credit and debit cards less than before the pandemic, but when they do, they tend to spend more.
The Fed also found that the automated clearing house was the only core payment system to see transaction numbers grow in 2020. More recent data provided by Nacha shows that through the third quarter of 2021 there were 21.7 billion ACH payments, an increase of 9.6 percent over the same period of 2020. This included a 73 percent increase in same-day ACH payments.
Historically, ACH payments have taken two days or more to clear and settle, but recent rule changes support settlement of transactions up to $100,000 on a same-day basis; in March the threshold rises to $1 million.
The Fed regularly collects data from large financial institutions and payment networks to gauge usage of various noncash payment types, and publishes a comprehensive payments study every three years detailing findings. The most recent study covered 2019 and was released at year-end 2020. Between reports, the Fed publishes updates; the latest of these covers 2020.
According to the update, 2020 brought "an unprecedented decline" of 11.5 billion in card-present payments. That amounts to a 13 percent increase over 2019. Card-not-present transactions rose "a similarly unprecedented" 8.7 billion, or nearly 24 percent. (The Fed lumped together credit, debit and prepaid card payments into one master category for this report.)
Even with the increase in CNP transactions, the overall number of card payments fell 0.39 percent in 2020, the first time a decline was recorded since the Fed first began tallying totals, in 2000. Also, for the first time the value of CNP transactions ($3.85 trillion) exceeded the total value of in-person transactions ($3.20 trillion) in 2020. The all-time peak for in-person card payments ($3.51 trillion) was back in 2019.
Despite the decline in number, cards remain the most popular form of noncash payment used by U.S. consumers, the Fed said. Consumers made 124.4 billion credit, debit and prepaid debit card payments in 2020; 79.4 billion in person and 45.0 billion CNP.
Checks saw the biggest use losses, falling from 8.55 percent of all noncash payments in 2018 to 6.51 percent in 2020. The total number of commercial checks fell 14.2 percent, "substantially faster by number and value in 2020 compared to other recent years," the Fed wrote.
The pandemic also helped to spur growth in emerging payment form factors, like in-person contactless cards, digital wallets and person-to-person payments, the Fed noted. But overall numbers for these payment types still pale in comparison to traditional card payments.
Contactless card payments were up a whopping 172.3 percent in 2020, to total 3.7 billion. By value, contactless card payments totaled $110 billion in 2020, compared to $20 billion in 2019. Digital wallet card payments also grew significantly from a rather small base. Credit and debit card payments made using digital wallets represented 2.6 percent of all card payments in 2020, and 1.47 percent of total value. Financial institutions also saw 11.5 percent growth in the number of accounts accessible using digital wallets.
A recent phenomenon not covered by the Fed's report, but available from other sources, points to emerging consumer demand for paying with cryptocurrency. Make no mistake, cryptocurrency payments are coming to the POS. They may plod along, like mobile and contactless did in the past, but for a much briefer period.
Consumers already have access to crypto-linked cards. Visa reported more than $1 billion was spent using crypto-linked Visa cards in the first half of 2021; by early November that total had climbed to $3.5 billion, according to the website TechCrunch.
A new study by CITE Research for the digital payments company Cantaloupe revealed that two-thirds of consumers who own cryptocurrencies would consider using them for purchases if their crypto assets were stored in a mobile (digital) wallet. Nearly one in five (19 percent) would pay with crypto from a mobile wallet if it were easy to do. Visa offers an even rosier outlook: 81 percent of crypto owners it surveyed last year expressed interest in making payments with crypto-linked cards.
According to the Pew Research Center about one in six (16 percent) of American adults own or have traded cryptocurrencies.
"With the popularity and ownership of cryptocurrency growing, it is critical that retailers find ways to accept this new form of payment, and the easiest way may be through mobile wallets," said Sean Feeney, CEO at Cantaloupe. "Our research shows that the needle is moving quickly, consumers are more comfortable paying with mobile apps than ever before, and it's time for the retail industry to be ready to meet expectations of consumers who prefer crypto for payment, and begin to accept it."
To date, most crypto-payments activity has been at online merchants, like Microsoft and Overstock. But major brick-and-mortar merchants, like Home Depot, are accepting crypto payments, too. "[T]he appetite for crypto payments has exploded," Jeremy Belostock, head of strategy at Verifone, said in a press statement.
Crypto-wallet giant BitPay offers a BitPay Mastercard and app where crypto-holders can store cryptocurrencies and access the assets for spending.
BitPay is also partnering with Verifone to support cryptocurrency acceptance at merchant terminals and for ecommerce/in-app payments. The solution, expected to become available by this spring, requires a Verifone Engage terminal or an Android device connected to Verifone cloud services.
At checkout, the consumer selects their preferred crypto wallet on the POS device, then scans an on-screen QR code using that wallet to complete the transaction. The cryptocurrency is directed immediately to BitPay, whereupon the merchant gets an approval message. BitPay immediately converts the crypto to dollars and funds get settled to the merchant account just like a card transaction.
It's fair to say that we can expect more developments like this in 2022. 
Patti Murphy is senior editor at The Green Sheet and self-described payments maven of the fourth estate. Follow her on Twitter @GS_PayMaven.
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