Long-term digital adoption – not so weird

For people living in “WEIRD” economies – that is western, educated, industrialised, rich and democratic societies - digital adoption and usage is very different to emerging economies and driven by a variety of factors. WEIRD economies include markets like Canada, the US, the UK, France and Australia. They were the focus of the RFi Group’s Global Digital Banking Survey.

"Over half the population of WEIRD societies now engage with their financial institution via mobile at least once a month.”

Death of the branch

One of the most significant and least surprising shifts necessitated by movement restrictions and lockdowns has been channel usage. The long-term shift to digital is evident but 2020 saw a step-change in mobile banking which RFi Group believes will become the predominant banking channel over the next few years. Over half the population of WEIRD societies now engage with their financial institution via mobile at least once a month.

Branches saw a necessary decline in customers but while on average fewer than one in three consumers use a branch monthly, RFi Group expects at least one in five will still visit a branch on a monthly basis. 

Why is this?

Humans are creatures of habit and our behaviours are often entrenched. In this sense, branches are traditionally an ingrained channel. In addition, some of the tasks performed in a branch may either not be available ubiquitously through other channels or are not well known to customers.

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Is cash still king or will cards steal the crown? 

Sometimes consumers have to be encouraged to change their behaviour before we see any step changes. This could be seen firsthand with physical cash through 2020.

Ultimately, an environment in which we are asked to clean our hands with sanitiser in every shop is not conducive to regularly handling cash. As a result, usage of cash in RFi’s Global Digital survey dropped by an average of 17 per cent from 2019 to the end of 2020 across WEIRD economies.

So, is this the death knell for cash? Not in the short- to medium-term. 

In 2021 there will be a small rebound followed by a return to long-term downward trends for cash usage. By 2025 RFi still anticipates cash to be a regular feature of consumer payments in WEIRD economies for more than 20 per cent of consumers. 

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The beneficiary of the cash decline in 2020 was the physical card. In the UK, regular debit card usage grew by 5 per cent over the 2019 to 2020 period while in Canada regular credit card usage grew by 5 percentage points to 71 per cent of consumers over the same period. 

At the same time, as card usage increased, research illustrates a tick up in contactless usage. Australia has long led the way in contactless card usage but had seen it plateau in 2018 and 2019 at 70 per cent of the population. 2020 saw this proportion jump to 86 per cent as consumers sought to minimise contact with payments in as many ways as possible. 

This knock-on effect has also been seen to an extent in the perennially underperforming world of mobile wallets. However, the jumps are less meteoric, with regular mobile wallet usage still something of an exception for the large majority of WEIRD consumers. The UK led the way with regular usage at the end of 2020 but with only 11 per cent of consumers fitting this criterion, there is more to be done before Apple Pay and Google Pay and their ilk win over the payments landscape.

Success in the payments world is underpinned by three pillars: speed, convenience and security. If consumers feel like their current payment preferences fulfil these three criteria, it will be hard to shake this behaviour to any large extent. Mobile wallets have discovered this the hard way in recent years.

Tried and trusted or new and shiny? 

With these changes in channel and payment behaviour, it should come as no surprise there have been shifts in the extent to which WEIRD consumers are willing to use a digital-only provider for their main financial institution. 

Banks are the most trusted institutions for consumers when it comes to keeping their data safe. Globally, when asked to share the extent to which they trust certain types of organisations in this regard, banks come out on top for consumers. 

So, does this mean, if you are a traditional bank, you have no threat to worry about from neo-banks or fintechs? Unfortunately not. In WEIRD societies, the proportion of consumers comfortable with a digital-only provider sat at 42 per cent at the end of 2020, up 5 percentage points from the end of 2019.

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Why are we seeing greater comfort with these providers? In the words of the consumers, they are becoming familiar with digital brands, which will breed comfort with usage and in turn breed trust.

The new normal? 

So, what’s the outlook? Longer-term banking and payments trends will be determined by the extent to which any new behaviours become habitual. This happens when consumers use a new thing and like it.

1. We use the new way once 
2. We like the new way 
3. We are presented with opportunities to use the new way again (and again) 
4. We continue to use the new way at the expense of the old way

According to the experts, habits take anything from 21 to 254 days to form (depending on what source you believe). It has now been well over a year since the pandemic first hit and comfortably more than 254 days, so it’s a fair bet that many of these changes will become permanent.

One thing is certain though: we’ll continue to see digital adoption and electronic payments rise in popularity and digital-only products and services will still pose a threat to the traditional. 

To date, traditional players have been able to rely on trust but circumstances are causing consumers to try new things. Trust is important but it is not static. Should digital players act on these insights, this may be the premise on which they'll have the opportunity to deepen relationships and build trust, perhaps one day leading them to stand on equal footing with traditional providers. 

Alan Shields is Chief Data Officer at RFi Group

This article was originally published by RFi Group