With looming recession, are consumer payment preferences changing?

By Puja Sharma

One-third of consumers believe payment companies aren’t able to help them tackle the cost-of-living crisis New research from Carta Worldwide explores the impact of the cost-of-living crisis and looming recession on consumer payment preferences

Carta Worldwide, the proven global digital payments pioneer and a subsidiary of Mogo Inc., announced the launch of a new study that reveals consumers are increasingly ambivalent toward their payments providers because they are failing to meet their needs in the economic downturn.

The study ‘Carta Worldwide Payments Pulse 2023: Why payment providers need to be purpose-driven’ reveals that consumers are focused on saving for the future, paying off debt, and adjusting their outgoings because they can no longer afford their current lifestyle. Yet payment providers are failing to provide consumers the services they want to better manage their money.

The study is based on an independent survey of 1,000 UK consumers in November 2022 Censuswide.  Now, the shockwaves of the recession are causing them to peddle back, returning to trusted methods of payment.

Payments with purpose Firms must align with customer values and emerging needs, centered around their financial goals, savings, and security. During downturns, values take on heightened importance and it will be the agile payments providers that find innovative ways to help consumers better manage their spending that will be successful.

Consumers’ financial goals for the new year expectedly focus on saving for their future (36%), paying off debt (26%), and adjusting their outgoings (17%) because they can no longer afford their current lifestyle.

Around 41% of younger respondents (ages 18-34) picked “start to invest” or “invest more” as one of their top three financial goals for 2023, indicating a desire to make money work harder in the current high-interest environment. The desire for better experiences

A quarter (24%) of consumers wish they had better insight into their payment behaviors so they can meet these goals. Younger respondents were more likely to believe there are areas in which their payment experiences could improve. Only 8% of 18-24-year-olds thought nothing needed to be improved over the next few months, compared to 56% of 55+ year-olds.

With the current cost of living crisis in mind, a higher proportion of young people compared to older respondents indicated they would change habits by analysing their spending more (28% vs 16%) and finding easier ways to pay across borders (28% vs 13%).

Security is the most important aspect of the way consumers make payments (41%). There is an opportunity for payment providers to prove their value, utility, and security, to the 42% of consumers who use cash most often. Evolution, not revolution tough times can lead to profound innovation, but to sustain growth innovation must happen on top of trusted and more traditional methods of payment and align with consumers’ new preferences.

New and disruptive services like “embedded payments” won’t gain traction during the downturn, unless they align payments with purpose. Credit is most popular within the 18-24 age range, with 42% of respondents choosing it as a preferred payment method. Over half (51%) of all respondents made no embedded payment purchases in the last three months.

“The payments industry must now focus on fusing trusted and traditional methods with real purpose to meet the changing needs of consumers in the wake of the cost of living crisis and recession,” said Richard Wray, Chief Operations Officer at Carta Worldwide. “The research clearly shows that there is an emerging demand for purposeful payments from supporting new financial goals, better insights into spending, and more security. With many providers struggling to meet these demands, those that can deliver payments with purpose will be in pole position.”

Key findings:

• Return to the payments mean the pandemic accelerated innovations in digital payments and ushered in significant changes in consumer payments habits, pushing them beyond the mean.
• Cards are still the most popular payment method. Almost all (95%) of consumers said they used either credit (65%) or debit cards (30%).
• Cash is second only to cards, with 42% of consumers using the payment method regularly.
• While existing payment methods are preferred, three-quarters (75%) of consumers plan to change their payment habits to meet the wider economic downturn.
• However, more than a third (37%) of consumers believe payments providers aren’t able to help them tackle the demands driven by the cost-of-living crisis and recession.