UK cash usage is now declining the fastest of any of Europe’s major economies, plummeting by almost 40% in 2020 due to COVID-19 and the rush for digital payments.
Credit cards are remaining the staples of the payments industry and show flexibility in adapting to new trends!
According to “Finder statistics” in January 2021, there were 62.8 million credit cards issued to UK residents. Throughout the states, the credit card industry is a major payment business. Credit cards compromised 23.6% according to the “Nilson” report.
Still, the usage of credit cards decreased slowly in 2020, this can be attributed mainly to continuous lockdowns and a significant shift of value of the retail industry to online commerce, and thus the acceleration of other digital payment methods. “Finder” report states that there has been a 3% decrease (-1.9 million) in the number of credit card accounts open between January 2020 and January 2021.
COVID- 19, impacted the credit card industry stimulating it to adapt to new realities and provide new technologies to better align with customer preferences.
The transition from traditional card payment methods to digital methods.
As stated by Accenture, “the use of cash during pandemics rapidly declined by 50% providing the space for the rapid adoption of cutting-edge technologies.
An alternate method of payment is known as “contactless payments”. The impact of COVID-19 highlights the necessity for contactless, seamless, and secure payments. Contactless payments rocketed during the pandemic, enabling users to avoid risks of touching surfaces and preventing the overall spread of the virus. An example, Mastercard witnessed a surge of 40% in contactless payments within the first quarter of the year.
In the states, 51% of the population have resorted to using mobile wallets, such as Apple Pay and other tab-to-go credit cards. The “tap and pay” cards and e-wallets are the mainstream payments method in today’s tradition, resulting in almost 90% of all credit transactions last year- according to Barclaycard. Payments are permitted without a physical touch of the POS device due to NFC (near- field- communication) technology. Consumers are required to bring their card or phone close to the terminal and the card information will be transmitted via NFC technology or QR codes.
While contactless cards are the perfect means of payment for older generations, GenZ and millennials are interested in payments methods other than traditional credit cards for purchases. The recent decision to raise the spending limit of contactless cards to 100 has also it’s a positive impact on the use of these cards.
From mobile wallets to retail apps, younger consumers are looking to make purchases in the most efficient and convenient way possible. Apple card launched in 2019, rocketed the transactions volume and revenue, becoming one of the primary payment methods in the USA.
Since offering QR code payments for business use in May 2020, PayPal has drawn more than 1 million merchants to the feature.
Digital wallets in their turn promote the acceleration of another trend - smart payments - payments in wearables, such as watches, glasses, the payment are based on the same technologies: contactless RFID (radio frequency identification technology) with NFC or QR code.
New Rewards Tactics
Credit card rewards programs are the key point in customers acquiring. Rewards stimulate consumers to use multiple cards, choosing the variety of rewards offered by each card.
Reward and loyalty programs are one of the turning points in achieving an outstanding customer experience. For the previous year, given the effect of COVID consumers’ ability to earn rewards had been placed on hold. Therefore, customers couldn’t take advantage of their rewards, especially for travel cards ad hostility- based cards which negatively impacted customer loyalty.
As a way out of this situation, most forward-looking credit card companies were obliged to show flexibility and navigate consumer expectations from their reward card into alternative reward spheres so that consumers can take advantage.
For example, most companies successfully compensate unused travel rewards by replacing them with rewards on everyday essentials such as groceries, takeout, delivery, and gas. The flexibility of using, redeeming, and controlling the rewards is one of the main reasons why cardholders choose credit card companies.
According to Margeta’s survey, 61% mention referring to services of non-traditional financial institutions in case of any flexible offerings, including flexibility and benefits with reward programs. Customers want to ensure they take full advantage of their rewards and align to their lifestyle. Thus, companies are required to make an effort and rebuild the current reward program to attain customers.
Credit cards and cryptocurrency
Cryptocurrency has become one of the mainstream elements of the payment industry.
The interest in cryptocurrency has been rising from day to day, and when major payment networks such as Visa and Mastercard back up the new currency, the interest and adoption are induced in a faster way. New initiatives, such as acceptance of cryptocurrency through new crypto-cards and crypto-reward cards are steps toward the broader adoption of crypto payments in the credit card industry.
Recently Visa has announced that the use of crypto-linked cards tops 1 billion in the first half of 2021. Visa also disclosed that it has partnered with no less than 50 crypto platforms via card programs to make transactions available and convenient for crypto-customers.
Mastercard in turn also announced the launch of the card with crypto exchange Gemini- a “first credit card to provide real-time crypto rewards, up to 3% in crypto on purchases”.
As more crypto cards are becoming available, consumer interest is growing to earn rewards in everyday spending. Crypto credit cards function in the same aspect as credit cards, except that they source funds and pay rewards using digital currency- such as Bitcoin.
A much vaster field is presented by crypto rewards credit cards, there are a dizzying array of rewards credit cards that use cryptocurrency as rewards, and makes it easier for users to secure cryptocurrency according to spending.
COVID has changed the way consumers interact with payment instruments. The payment industry has acquired alternative methods and new services to improve customer experience. However, one of the staples- the credit cards industry, despite growing competition, winning over the customers due to maintaining the trends and adapting to new realities.