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Payment Providers’ Response to the Cost of Living Crisis Below Par Say Consumers

One-third of consumers believe payment providers 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.

The consumer consensus revealed in the digital payment company’s latest study indicates that payment providers are failing to respond appropriately to the economic downturn.

The study, which is based on an independent survey of 1,000 UK consumers conducted in November 2022, identifies the changing consumer habits around money and how such a shift translates into their relationship with payment providers.

Here are the key findings:

Return to the payments mean

Digital payment innovation became one of the defining outcomes of the pandemic and ushered in significant changes in consumer payment habits, pushing them beyond the mean.

But now the oncoming recession is peddling these evolved habits back to tried and tested methods of payment.

Cards retain the top spot among payment methods. All but five per cent of consumers said they use credit and/or debit cards. Cash is naturally second to this, with 42 per cent engaging with it on a regular basis.

With existing payment methods preferred, three-quarters of consumers plan to change their payment habits to meet the wider economic downturn.

Despite this, 37 per cent believe payment providers aren’t capable of helping to tackle the demands driven by the cost-of-living crisis and recession.

Payments with purpose

The study advises firms to align these new emerging customer values and needs. Payment providers should centre themselves around serving their customers’ financial goals, savings and security.

The economic downturn is a time to closely monitor and react to how customer spending habits are changing. Above all, the provision of services must align with consumer core values.

The study says that only the most innovative payment providers that actively help their customers manage their spending will be successful.

Consumer financial goals shift

A new year brings new financial goals. According to the study, 26 per cent want to pay off existing debt in 2023, while 36 per cent have an eye on saving for the future. Furthermore, a lower 17 per cent plan to adjust their outgoings to find new funding amid the economic crisis.

Younger respondents were found to be particularly reactive to the high-interest environment. Forty-one per cent of those between 18 and 34 identified ‘start to invet’ or ‘invest more’ at the top of their financial goals for 2023. This indicates a wanting for money to work harder.

A desire for better experiences

Among these goals and financial aspirations, a quarter of study respondents wish they had access to adequate insights into their payment behaviours, allowing for the aforementioned goals to be more easily met.

Again, younger respondents were more likely to believe there are areas in which their payments experiences could improve. Only eight per cent of 18 to 24-year-olds thought nothing needed to be improved over the next few months, compared to 56 per cent of 55+ year-olds.

However, 28 per cent of the 18 to 24-year-olds do see te benefit of financial analysis tools, compared to 16 per cent of over 55s.

On top of this, the study points to security as the most important part of the payment process for consumers; as agreed by 41 per cent. The data reveals an opportunity for providers to increase their market footprint through providing the value, utility and security needed by consumers.

Evolution not revolution

Tough times can lead to profound innovation, but to sustain growth that 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. Just over half of respondents made no embedded payment purchases during the three months prior to the study being conducted.

Instead, credit is most popular within the 18-24 age range, with 42 per cent of respondents choosing it as a preferred payment method.

“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,” comments Carta Worldwide COO, Richard Wray.

“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 are able to deliver payments with purpose will be in pole position.”

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