Meet the ‘cool kids’ shaping the future of payments

With an average age of 36, these tech-and innovation-loving UK consumers will soon become the dominant spenders, and they’re looking for choice, flexibility and control.

Research by Visa identified four payment personas, based on their attitudes to payments and differing by age group, affluence and comfort using technology.

While all four personas will continue to exist alongside each other, the spending power of the cool and the confident personas will increase in the coming five to ten years, as spending power for the careful, and the curious starts to decline. It will be critical for merchants and financial institutions to adapt now to meet the growing need.

The good news is that, despite the trend to digital and mobile-first solutions, our research found that the factors consumers are looking for in any successful payment are the same, now and in the future:

• Ease and convenience – minimal effort to set up and use
• Security – money is protected and safe from fraud
• Control – person can manage their spending
• Availability – payment method is accepted everywhere
• Knowledge – people understand how to use it, as well as risks and benefits
• Right first time

So, Visa believes that in the future of payments:
• The card credential will continue to underpin many payment methods, while no longer in a physical form but as a token
• Digital, mobile-first experiences, control and flexibility and advanced security, will be non-negotiable, and require banks to modernise their technology to increase agility and reduce time to market
• Merchant checkout journeys will continue to influence the choice of payment methods.

But let’s go back to the beginning
We set out in this research to help industry leaders answer the question – how do consumers pay today? To understand why they choose a particular payment method over another and use this to determine how consumers may engage in future versus the dominant forms today.

We found:
• UK consumers that were surveyed don’t suffer from a lack of choice when it comes to payment methods, ranging from the more traditional cards or transfers, through to e-wallets and crypto. But there are dominant payment methods depending on the use case. For instance, Debit cards are dominant (30-56% preference) for day-to-day expenses, both online and in-store. While Direct Debit is currently more popular for recurring payments such as subscriptions, facility bills, mortgage or rent payments.
• Age and affluence are particularly strong influencers of choice:
o Age is the strongest factor across all payment methods. The biggest impact can be seen in the use of e-wallets which is skewed towards the young.
o Affluence is quite determining in the use of credit products, it’s 20% higher for those who earn between 80-100k per year.
o One surprising insight was that BNPL scored higher with a slightly older age and more affluent group (44% in the 55-64 age group).

But consumer perception plays a massive role in their choice of payment methods.
Many of the respondents have default payment methods that they feel are easier, faster and most secure, primarily due to their familiarity with them. For example, 78% gave no particular reason to why they use debit cards across all use cases.

The impact of this is that there is inertia, and therefore, changing and using a new method of payment is perceived as unnecessary or complicated. For example, 12% of the respondents who don’t use a debit card in an e-wallet stated complexity of setup as the reason.

Moving from curious to cool
Breaking this inertia requires two things: motivation and ease. Ease refers to a seamless payment experience in both setting up and ongoing using the payment method. We identified four main factors that drive that motivation:

• Firstly, knowledge and awareness: through ads and rewards, friends or family using a specific method, etc. For instance, understanding that they won’t be charged when using BNPL can encourage people to try this method
• Previous experience also plays a key role. A bad experience, such as losing money in crypto currencies, can deter people from trying again
• Macroeconomic factors, for example the cost-of-living crisis, can push consumers towards credit payments or using cash to control their finances
• And lastly, moments of necessity. For instance, losing a physical card and realising they can still use it in their digital wallet

The second part of our research focused on new payment methods. The consumers we surveyed have become more active in some new payment methods in the last three years. The most significant are BNPL and e-wallets. In fact, 67% of respondents use an e-wallet. While crypto, despite its growth, remains a niche payment method used by 6% of respondents.

However, when asked about a wider mainstream use of these new payment methods respondents were hesitant.
• Feelings about BNPL’s wider adoption were mixed, with 42% in favour and 48% against
• 52% of consumers crypto as a widely accepted payment method was not a good idea
• E-wallets were favorably seen by +50% of respondents
• And 56 % of the respondents thought it a good idea and safe to use A2A, despite an admitted low level of awareness and practical knowledge about it i.e. how to make a payment and what the benefits are.

What can I do about it?
As experiences and user journey become more digital-first, this is an increasingly important area for investment and innovation. In summary, our research suggests:
• Consumers are used to choice, but there are dominant methods by payment scenario
• Payments are a habit and generate inertia; ‘better’ does not guarantee uptake
• Merchants play an increasingly significant role in driving change in payment behaviour
• While recent usage is growing, consumers express hesitation about new methods
• Ultimately, when it comes to how consumer pay, they look for six key attributes
• Understanding who will drive future expectations can give insight into the future of payments.

Methodology
The study was conducted by Visa Consulting & Analytics, via both qualitative and quantitative research. The quantitative study involved 2,000 + UK consumers via an online questionnaire, and a qualitative study that included focus groups where we analysed the attitudes towards payments of 22 UK consumers. Full report and methodology available here.