Apps Will Be a Major Force in Payments For Years to Come, a Report Argues

Payments companies wondering how digital payments will evolve and what impact today’s younger consumers might have as they age may want to consider the role of apps, suggests the “Future of Money Study 2018” from Koski Research Inc.

San Francisco-based Koski, in research that included 1,000 U.S. adults and a 200-person sample of 16-to-19-year-old consumers, found that 25% think a payment app will be the top-of-wallet choice for in-person payments in five years, compared with 8% who think that that is true today.

Today’s preferred payment method, debit at 39%, will fall to 19% in five years, the report forecasts. Credit, at 21% today, goes to 15%. Prepaid cards, at 6% today, drop to 3% in five years. Checks remain constant at 4%.

In five years, 5% of consumers will choose a cryptocurrency first, and 4% anticipate they will select something not yet invented.

Cash, at 34% today and 25% in five years, will hold on as the second favorite payment method.

A number of factors could be influencing these shifts, with a focus on spending, says Lilah Koski, chief executive of the research firm.

“We have a few hypotheses about this,” Koski says. “One is that it’s possible we will see a cyclical trend in that people are more focused on work in the spring (with taxes) and spending in the fall (with holiday shopping). We will watch for this trend this year when we field the study in the spring and fall again.”

Other factors may be that as consumers think about spending it includes “shopping behavior as well and that more people are shopping online,” Koski says in an email to Digital Transactions News.

“The third hypothesis is based our understanding that there has been much more media attention on payments, that digital payments are more accessible and prevalent, and that more people are using them,” she says. “I lean toward the latter hypothesis, though we will continue to look at the data and ask more questions to understand this more fully in future waves.”

Just as consumers anticipate more in-person payment options in five years, they expect more online-payment types. Today, consumers consider six online-payment options, but in five years they expect 10 selections.

At the top, for today and in five years, is PayPal Holdings Inc., at 35% and 32%, respectively. Debit, at 23% now, will be the third most popular choice in the future at 15%. Credit, at 20% today, will drop to 15%.

Rounding out the rest of current options are prepaid cards, 9%; Amazon Pay, 6%; and Visa Checkout, 4%.

The other future options include cryptocurrency, 7%; something not yet invented, 7%; prepaid cards, 7%; Visa Checkout, 6%; Apple Pay, 5%; Google Pay, 3%; and Amazon Pay, 2%.