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Even as shoppers return to brick-and-mortar stores, they've changed the way they pay for goods and services.

Rather than going back to physical credit cards that require paper receipts, there’s now a preference for frictionless payment methods. These methods reduce the steps in the buying process and include mobile and digital wallets, one-click payments, auto-renewing subscriptions, and in-app payments.
Shoppers can now order ahead in-app and pick up curbside. This option of browsing online and purchasing something you can pick up and wear within the hour, allows consumers to pay how they want and still enjoy the immediacy of the brick-and-mortar experience.

Merging online and offline payment methods so customers can shop where they want when they want, will continue to be prevalent in 2023. Businesses processed $3.9 trillion in frictionless payments in 2020, a number that’s expected to increase to $8 trillion by 2024.
 
When a company gets to be the size of Amazon, it can cause trends all by itself. In late October 2022, just in time for the holiday shopping season, the online retailing giant announced it would begin accepting Venmo for purchases through its mobile app and on its website. The deal, pending since late 2021, would be a major boost to Venmo usage.

Venmo has approximately 90 million users in the U.S. Many users fund their Venmo purchases from their bank deposit accounts, which turns Venmo into a quasi debit card on Amazon.
Financial institutions pick up some interchange income from when consumers load money from their deposit accounts into their Venmo accounts. (By contrast, bank-owned Zelle is barred from competing with financial institutions in the debit space.) The ecommerce giant is actually trailing its rival, Walmart, as Walmart has been accepting both PayPal and Venmo “P2P” services on its website and in its stores for some time.

During PayPal’s second quarter 2022 earnings briefing with analysts, CEO and President Dan Schulman said that he was excited about the deal. Venmo skews towards younger consumers, many of whom use its social media channel to talk about what they’ve bought, which gives merchants free publicity. “On all of these things you start off in one place and then you see how things evolve from there,” said Schulman.
Keep Venmo on your radar. More broadly, Schulman observed that “PayPal started off many, many moons ago as a P2P business and then started monetizing merchant payments. Venmo started off as a P2P business. It’s got a ton of advantages that PayPal didn’t have those many, many years ago. ‘Pay with Venmo’ I think will be the dominant way we will monetize Venmo going forward.”
 
The rise of digital payments has made it considerably easier for creators to get paid online. Instead of relying on product sales, affiliate marketing, and brand sponsorships, social media creators will be able to get paid directly through their chosen app by their followers. TikTok has a tipping feature for accounts with over 100,000 followers. As a Twitch affiliate you can receive donations on your streams via Twitch Bits, a form of virtual currency.

These types of features allow consumers to continue the in-feed experience while creators, influencers, and small businesses can generate revenue. Influencers can receive tips without losing a cut of their money to a third party.
 
Personal finance guru Dave Ramsey sells books and more on his website, but you can’t pay with a credit card. The site explains: “If you’ve ever listened to The Dave Ramsey Show or read any of his books, you know he helps people out of debt. Credit cards add debt. Debit cards pull from your bank account. They work like cash.”

Ramsey has company in this view. Multiple studies indicate that more Americans are shifting to debit cards as well, for a host of reasons, one of them being to avoid credit cards. Ramsey’s company is actually sponsoring a new debit card of its own, Gazelle, in conjunction with Pathward, N.A. (formerly Metabank). Unlike many other debit cards, Gazelle features rewards.

Consumers' Changing Payment Preference:

Debit cards overtook credit cards as consumers' most preferred payment cards in a survey by 451 Research.

56.2% of the Q2 2022 study sample preferred debit and 39.5% preferred credit. This was a switch from the 2021 study, which found that 40.2% favored debit and 54.6% favored credit.
More specifically, the firm’s research found that for households with annual income of $75,000 or more, credit cards are their primary card. For households below $75,000, the preference is for debit cards.

• $150,00-$249,000: 65.1% credit, 33.7% debit
• $125,000-$149,999: 56.5% credit, 40.3% debit
• $100,000-$124,999: 65% credit, 32% debit
• $75,000-$99,999: 58.3% credit, 39.9% debit
• $50,000-$74,999: 42.9% credit, 54.6% debit
• $25,000-$49,999: 29.6% credit, 67.4% debit
• <$25,000: 18.3% credit, 71.6% debit

Significantly, this synchs with PSCU’s “Eye on Payments 2022” study, which found that 52% of people with annual household incomes below $75,000 preferred to use debit cards. Note that U.S. median household income for 2021 came to $70,784.

What’s driving the preference for debit. The 451 study cites multiple reasons the firm believes debit cards are taking off. A significant one is that younger consumers are leaning towards debit cards, in part because of reluctance to get into debt and in part out of security concerns. PIN-based debit offers an additional layer of protection over credit cards.

Pandemic Payment Inertia:

Many people loaded debit cards into digital wallets as their default option during Covid and some of that stuck.

In 2021 Mercator research cited in the PULSE Debit Issuer Study, debit cards represented 42% of cards loaded into mobile wallets, versus 35% for general-purpose credit cards.

A surprise: “We expected consumers to have a much higher preference for credit when travel resumed and stores reopened,” states 451. “However, we’ve found that consumers prefer debit more today than they did at the height of the pandemic.” Among younger generations, debit use increased in double digits in 2022 over 2021: Gen Z, 26.8%; Millennials, 18.4%; and Gen Xers, 18.6%.
 
Many negative headlines have been written about buy now, pay later offerings and, while obituaries may be an overreaction, change continues to come.
The Global Payments Innovation Jury report, sponsored in part by the World Bank, summed up the immediate future succinctly:

“BNPL usage is set to increase in the short/medium term because of strong benefits for consumers and merchants. However, credit losses are viewed as likely to increase significantly, and the sector is certain to lose its unregulated status in many major markets. Therefore, the rapid expansion is seen as a short-term phenomenon rather than a long-term game changer.”

Clearly, in the U.S., the Consumer Financial Protection Bureau is going to regulate BNPL in the future, with rulewriting underway, in the wake of its major report based on fact-finding among the leading players. The bureau has already issued an invitation to BNPL firms to “volunteer” for examinations ahead of regulations. This will change the business, but in the buildup to this in the U.S. and other countries analysts have pointed out that BNPL providers saw it coming and were beefing up compliance functions in anticipation of regulation.

Even as banking institutions step up their involvement in buy now, pay later, current BNPL providers will expand beyond their original offerings in order to drive more income, Insider Intelligence predicts.
Some financial experts, however, are pessimistic. BNPL is expected to gain some near-term momentum in the market, which "will eventually exhaust itself as regulators, losses, and the economy as a whole catch up."
 
Consumers now rely on their phones for pretty much everything, from ordering an Uber to booking dinner reservations to monitoring their blood glucose levels. As a result, expect to see a wave of “super apps” popping up. These apps act as a portal to a number of different virtual products and services.
BlackBerry founder Mike Lazaridis was the first to use the term, defining it as “a closed ecosystem of many apps that people would use every day because they offer such a seamless, integrated, contextualized, and efficient experience.”
China’s popular WeChat app is a prime example. It started off as a simple messaging app, but now offers a collection of services including taxi rides, virtual wallets, hotel reservations, games, and even medical consultations.
In 2023, expect to see more of these super apps emerging with key payment features like buy now, pay later (BNPL) programs, which let consumers pay off purchases in monthly installments, and flexible payment methods.
 
Apple Pay, Google Pay, Shop Pay, and other digital wallet options are now a common fixture alongside other traditional payment options at the checkout counter. If you don't give customers the option to use a digital wallet, you're limiting the ways they can pay you.
Paying by phone has become a convenient way for shoppers to make purchases in an instant, whether they’re in-store or buying online. More than four billion global consumers will shop using their digital wallets by 2023. Digital wallet customers will exceed 1.6 billion at POS (point of sale) in 2023. That'll account for 30% of all POS payments.
 
QR codes seemed to die out years before the pandemic, only to come back with a vengeance when brands and venues were trying to limit the amount of cross-contamination through money, tickets, and receipts.

Now, QR codes are prevalent in a number of settings, including restaurants, where diners can scan a code to view the menu, place an order, and pay for their meal without waiting for a server, and physical stores, where shoppers can unlock discounts and extra product lines by simply scanning a QR code.
Decathlon’s “Scan & Go” app, for example, allows shoppers to skip long queues by scanning a QR code in store and getting products delivered directly to their door.
QR code payment users are expected to exceed 2.2 billion by 2025, equating to 29% of all mobile phone users globally.
 
More and more people trust digital payments and see them as an easy way to buy. Buyers who never considered using a digital app to pay for their lunch are now using smartphones to pay without a second thought. In 2023, consumers will expect businesses to give them options when they pay. And, expect to see more payment methods as consumer needs change and businesses adapt to meet those needs.