The rise of Big Tech, a culture of immediacy, and payment trends established over the last few years continue to reshape banking into the future. More and more financial institution customers—businesses and consumers alike—are turning to non-FI sources like PayPal, Stripe, Apple Pay, and Google Pay to meet their payments needs. Businesses and consumers are gravitating in this direction for ease of use, convenience, and reach, increasing competition for payment volume for bank-centric solutions. Financial institutions must understand what's at stake and how to increase payments market share.
Let’s take a closer look at the percentage of businesses partnering with non-FI sources.
Businesses’ Online Payments Market Share
Enlyft, a company that helps businesses target their ideal customers by assessing and analyzing data for sales and marketing teams, monitors the market share of over 15,000 technology products, including online payments. The company scans billions of public documents, enabling it to collect deep insights on numerous companies, with over 100 data fields per company on average.
According to the company’s website, PayPal holds the lion’s share of the online payments market with 52.45% of online payments coming in through their online platform. Stripe is next in line, having captured 19.22% of the market, followed by Amazon Payments at 7.91% with market share, and Apple Pay controlling just 5.65% of the online payments market. Google Pay follows behind, with an online payments market share of only about 3 percent.
Based on these numbers alone, money services businesses and payment apps control 88.23% of the online payments market share. Opportunities exist for financial institutions to reverse this trend, but it will require an investment to understand the market better and strengthen relationships with their business customers.
Consumers’ Mobile Payments Usage
On the consumer side, people are growing increasingly comfortable making mobile payments using digital wallets. According to an ACI Worldwide news release, in the first half of 2022, nearly 60 percent of all consumers used a mobile wallet to make a payment at least once a week, compared to 46 percent in 2021.
As reported by MoneyTransfers.com, Apple Pay dominates the mobile wallet space, with 92% of all U.S. mobile payments completed in 2020 going to Apple Pay . Not surprisingly, 73.1% of Gen Z mobile wallet users used Apple Pay to make an in-store purchase during a period of one week . In addition, more than half (67%) of the consumers who used Apple Pay during a 24-hour period used it to buy groceries.
Although Apple Pay leads in the mobile wallet space, growth remains slow in other areas, with 39 percent of Americans saying they have never heard of Apply Pay.
Google Pay trails Apple Pay in the mobile payments space, but it is still one of the leading payments methods, with about 20% of all consumer mobile transactions using the digital payment method.
Other statistics of note:
• Millennials are most likely to use Google Pay
• Google Pay is Android’s Mobile Payment Option
• Google Pay should add around 10.5 million users by 2025
Evidence of consumers growing pursuit of convenience and payment experiences that better fit their daily lives is seen in increased mobile payments usage. Whether financial trends can reverse this trend by promoting bank cards for mobile payments is uncertain, but innovating to meet the needs of customers that prefer mobile options should remain a top priority.
The Rise of Faster Payments
Also important to note is growing interest in faster payments and urgent payments. According to the bi-annual (1H) 2022 ACI Speedpay Pulse consumer survey:
- One in three consumers says that they have had to make an urgent or same-day payment this past year, which is significantly higher than in 2021 (one in five). Part of this can be attributed to an increase in total bills, most marked among younger bill payers, making keeping track of them more difficult.
- 38.4% of people surveyed said they are more willing to adopt new channels and methods for faster payment processing than in 2021 (30.9%). This uptick might be driven by frustration with bill payments processing times (29.6% in 2022 vs. 26% in 2021).
Other key findings revealed that real-time payments functionality is growing, with 41.2% saying they would be interested in Request to Pay (RtP). The top three most important benefits of real-time payments include: avoiding late charges (32%), immediate confirmation that payment was received (24.9%), and immediate payment posting/transfer of funds (20.8%).
Faster and real-time payments offer tremendous opportunities for financial institutions to make the most of the opportunities inherent in this trend.
Next Steps for Financial Institutions
With the rising threat of money services businesses and the increased usage of non-FI payment apps by consumers and businesses alike, financial institutions need to be prepared to act. In addition, customers’ growing preferences for convenience and payments experiences that fit their lifestyles are critical for charting the future of payments. Education plays a critical role in navigating the current payments landscape and understanding available options.
To that point, this year’s virtual Future of Payments Symposium, on Dec. 1, 2022, will offer an overview of the current payments landscape, address industry threats, and offer potential solutions designed to overcome industry challenges and maximize available opportunities.
Highlights from this year’s program include:
- FedNow — Ready for Launch, Tom Goodman, Federal Reserve Bank of Boston
- Faster Payments 2022: Where We Are and Where We’re Going, Jim Colassano, The Clearing House
- How CHUCK Solves Industry Problems, Julie Thurlow, Reading Cooperative
The Symposium, open to all payments professionals, will feature discussions between financial institutions (FI) and FinTechs, and present panels and lectures on the latest topics for what’s next for the payments industry. NEACH members and special guests will also share their insights on developments in the payments landscape.
To learn more, visit the Future of Payments Symposium website at fps.neach.org.
We hope to see you there!
AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.