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The future of payments
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TNS 2013 future of payments study. TNS UK undertook research among 1702 UK consumers who had recently made payments, about those purchase occasions. The research was carried out in consultation with the payments industry and covers all current major payment methods. Fieldwork took place in May 2013. The research sought to identify opportunities for payment methods to better serve consumers. All data in this report is among overall sample unless otherwise stated.
Today’s consumer has almost limitless ways
to pay for goods or services. Where once
we had a simple choice between cash
cheque or card, there is now a multitude
of other options – from contactless cards
to PayPal, online to smartphone apps.
These competing payment methods are
sold to consumers on their simplicity
and ease of use, promising a perfect fit
with our lifestyle and shopping habits.
In fact, the vast number of competing
means of payment available today has
left the consumer underwhelmed and
overloaded with choice.
No single method of payment has yet
succeeded in combining the simplicity,
security and dependability of hard currency
for the majority, although banking apps,
mobile and contactless payments are
valued by increasing numbers of people.
The challenge remains to engage
individual consumers with the payment
options that suit them best for each
transaction and give them the level of
control and certainty they are seeking.
This report, based on a major study of
1702 UK consumers, outlines how the
challenge can be addressed.
Making sense of payment proliferation
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Technology is changing the way we
think about purchasing and payment.
New methods and devices are affecting
our expectations of payment in terms of
accessibility, security and rewards.
A range of providers – from banks to
telcos, hardware manufacturers to retailers
have harnessed technology to create a
multitude of ways to pay, resulting in a
veritable soup of payment brands.
TNS UK’s research reveals that the average
consumer uses five different payment
methods each month, with a third using
six or more.
Changing behaviours
New methods and devices are affecting our expectations of payment in terms of accessibility, security and rewards.
The future of payments 5The future of payments 5
Types of payment used every month
4.9
Over 1/3 of customers use six or more
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Cash, credit cards and debit cards are
still among the most popular methods of
payment, although half of consumers use
newer technologies such as online and
PayPal at least once a month. Smartphone
apps and contactless cards are beginning to
establish themselves as payment methods,
although take-up has been slower than
expected by many in the industry.
Consumers spend smaller amounts with
cash and through online retail, while
cheques, phone and online banking are
used for bigger transactions.
How we spend our money
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The future of payments 7
Consumers use a wide range of payment methods
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Using payment method each month % Spend per occasion
8
12
16
25
28
44
49
50
55
84
91Cash
Debit card
PayPal
Credit card
Online CC/DC
Online banking
Cheque
Retail loyalty card
Online to retailer
Phone banking
Contactless
Smartphone app £24
£24
£104
£24
£24
£142
£151
£64
£79
£34
£52
£17
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Consumers are using different payment methods
for different occasions. Cash predominates for
small items, while most clothing, electronics and
books are bought online. Groceries and fuel are
dominated by payment cards, while cheques remain
the overwhelming favourite for paying tradespeople.
Different methods for different occasions
Mobile is the most favoured way of buying digital
services, such as in-app purchases.
While some occasions are dominated by a
single payment type, the likely trend is for
further fragmentation as smaller merchants and
tradespeople adopt new methods of payment.
A number of different payment types for different occasions % Credit cardDebit cardCash
Trades
Groceries
Restaurants & takeaways
Clothes, electronics, books
Digital
Small items
5
2
49
75
25
30
10 9
5 4
16 14
8 2
6 5
41 15
Base: sample size varies from 115 (digital downloads) to 1450 (groceries)
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While some occasions are dominated by a single payment type, the likely trend is for further fragmentation.
Cheque MobileOnlineOver the phone Other
0 1 278 8
1 0 569 1
2 1 117 0
0 0 96 0
40 0 222 0
1 66 10
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Regardless of the situation or payment
type, consumers seek three core benefits.
A payment method must be:
Dependable – it must always work and
be accepted
Simple – a single quick and easy step to
make a transaction
Secure – protects against fraud and ID
theft, an increasing consumer concern.
Currently, only cash fully meets all three
core needs. However, consumers have a
range of other needs and preferences from
their payment methods which change
according to different purchase occasions,
and which influence their preferred
method of payment. Understanding the
different types of consumer, and how
their preferences change from occasion to
occasion, is vital to supplying each person
with the right way to pay.
The three core needs of consumers
Only cash currently meets the core needs
Cash Debit cards
Online bank account
Contactless card
Online 3rd party
Credit card
Mobile
Dependable
Simple
Secure
Fully meets these needs Partially meets these needs Does not meet these needs
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When considering payment options,
consumers often have a variety of needs
over and above these core needs, such as
covering large or unexpected expenses,
getting balance updates or even building
reward points. Many purchases require a
trade-off between the various needs.
To understand these trade-offs, TNS used
its Matrix methodology to map the tensions
between the different requirements of
particular payment occasions.
So having established the payments
landscape we then asked our sample of
UK consumers for their ideal requirements
for a range of payment occasions, and
then asked them to rate different payment
methods against those requirements.
This enables us to plot how well current
methods are meeting particular payment
occasions, and also to identify areas where
consumers’ needs are not adequately met.
Understanding what consumers want
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Every payment method involves a
compromise between benefits. For
example, consumers making some types
of purchase want a simple, anonymous
transaction – one that always works and
doesn’t disclose personal information –
but at the same time require a validated
and informed payment that prevents
fraud and provides information such as
spend summaries.
There is also tension between ‘dependable
and flexible’ – methods that are widely
accepted and can be used in a variety of
situations – and ‘smart and connected’,
which are based on new technologies
and incorporate additional functions (and
personalisation).
Matrix enables us to plot various payment
types according to how well they fulfill
consumers’ needs.
Tensions and trade-offs
There are a number of trade-offs consumers need to make when choosing a payment type.
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Smart and connected
Dependable and flexible
Validated and informed
Simple and anonymous
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Cash is naturally at the ‘simple and
anonymous’ pole, while credit and debit
cards are seen as dependable and flexible,
while also tending towards ‘validated
and informed’. Newer technologies
such as phone/tablet payments and
contactless cards score highly for ‘smart
and connected’, but low for ‘dependable
and flexible’, while online and phone
banking are more associated with the
need for ‘validated and informed’ with
neither the ‘smart and connected’ nor
the ‘dependable and flexible’.
Tensions and trade-offs
Consumer perceptions of product characteristics determine where they fit.
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Cheque
Cash
Online banking
Contactless payment card
Phone/tablet payment
Card reader for phone/tablet
Online 3rd party e.g. PayPal
Phone banking
Debit cards
Credit cards
Smart and connected
Validated and informed
Simple and anonymous
Dependable and flexible
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Having established consumers’ perceptions of the
merits of various payment methods, we looked at
their ideal needs for different types of payment
occasion. Our data identifies six customer needs,
which can be assigned to two levels. These are
mapped on the facing page.
The first group of needs (in orange) are more
straightforward and together account for 41%
of consumer spend. These are:
No-hassle, quick and easy payment – such as
buying small items from a local shop (10% by
value of all transactions)
Recognised and accepted – assurance that the
consumer can buy much-needed goods at most
available places, for example when buying fuel
(15% of spend)
Enhanced fraud protection and benefits – typically in
situations where consumers spend larger amounts of
money with third parties, and expect the transaction
to be secure but also to result in benefits such as
insurance or air miles (16% of spend).
Satisfying these more straightforward needs is not
enough for all occasions. Many expect a range of
personal benefits from increasingly sophisticated
payment methods.
The research identified three ‘advanced needs’ (in red),
which reflect consumers’ desire for high levels of service,
access to information 24 hours a day, and the ability to
customise or use ‘smart services’.
The ‘advanced needs’ fall into two distinct groups. The
first, accounting for 33% of all spend, concerns financial
management, broken down in the following way:
Budget planning – enabling users to have instant
access to balance summaries so they can manage
their spend while paying. (14% of spend)
Service & in-control – a need for detailed tracking
of each payment and control over when payments
are debited – (19% of spend)
The last ‘advanced need’, ‘personalised & intelligent’,
accounts for the biggest proportion of all spending.
It focuses on the need for customised ‘smart’ services:
users want to integrate the purchase and payment
process into other activities such as searching for deals,
reading reviews and receiving rewards (26% of spend).
Plotting consumers’ ideal needs
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The six needs are complementary and fit with different parts of the market landscape
Budget planning
Personalised and intelligent
No hassle, quick & easy Service &
in-control
Recognised & accepted
Fraud protection & benefits
26%14%
19%
10%
16%15%
Smart and connected
Validated and informed
Simple and anonymous
Dependable and flexible
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Personalisation together with the
opportunity for co-creation is one of the
hottest topics in commerce. Shoe retailers
are enabling consumers to design their
trainers online; soft-drink manufacturers
have developed apps that enable users
to mix flavour combinations at drinks
fountains in restaurants; and car buyers
can choose every aspect of their vehicle
through the manufacturer’s website.
Personalisation and co-creation, it seems,
are everywhere: except for payments.
If we plot the payment types against the
six needs we have identified, we can see
that all the needs are met by existing
payment methods – with the exception
of ‘personalised and intelligent’, which
accounts for the largest share of total spend.
The research shows that there are many
opportunities to meet consumers’ needs
better. That, combined with the challenge
of meeting the ‘personalised and intelligent
need, represents a major opportunity to
capitalise on consumer demands.
The personalised payment opportunity
Personalisation and co-creation, it seems, are everywhere: except for payments.
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Currently no payment methods meet ‘personalised & intelligent’ need
Cash Debit cards
Credit card w/o benefits
Credit card with benefits
Online bank account
Online 3rd party
Tech enabled payments
No-hassle, quick and easy
Recognised and accepted
Fraud protection and benefits
Budget planning
Service and in-control
Personalised and intelligent
Fully meets these needs
Partially meets these needs
Does not meet these needs
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As we know, consumers are not a
homogeneous group. Every purchaser
has a different mix of characteristics,
attitudes, behaviours and priorities. And
just as each payment method is subject to
various tensions and trade-offs, consumer
attitudes can be broken down into two
dimensions that drive their purchasing
and payment behaviours.
These dimensions are the level of
engagement with, or detachment from,
technology; and their level of financial
involvement. Plotting consumers on these
two dimensions, we have identified five
main types of consumer.
The first two types represent those
who have a strong engagement with
technology and moderate levels of
financial involvement; together, they
represent 40 per cent of the population.
At the other end of the scale are those
who are less engaged with technology –
either through lack of purchasing power
(financially disengaged) or through
concern at limiting risk (conservatives).
Finally, the wealthy traditionalists are
financially astute, but less engaged with
modern technology.
These five groups have very different
priorities and preferences for ways to pay.
Types of consumer
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The five consumer types
The tech-savvy best deal seeker
Proportion of overall spend
Risk-averse conservatives
The financially disengaged
The tech lover with limited budget
Wealthy traditionalists
23% 17% 18% 19% 23%
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If we look at the characteristics and
attitudes of the five consumer types,
we can identify the needs that will
influence their preferred methods of
payments. The two tech-engaged groups
are the most likely to identify with
‘personalised and intelligent’ payments.
This further highlights the opportunity
of developing such methods, as these
groups are typically the early adopters or
trend-setters whose advocacy will power
awareness and interest.
The risk-averse conservative and, to
some extent, financially disengaged
are more concerned with managing
their money and minimising risk,
ideally without the distraction of
new technology.
Finally, the wealthy traditionalist,
with huge spending power and low
interest in technology, wants a method
that is universally accepted and brings
enhanced benefits or rewards.
Matching methods with consumers
“All five consumer segments share common core needs when it
comes to their payment choices – simple, dependable and secure.
It is the needs they have beyond this that determine how invested
they will become in a new payment type. The choice financial
institutions and technology enablers need to make is how to
‘personalise’ their offers enough to include the majority, without
compromising on simplicity or security.”
Phil Sutcliffe Board Director TNS UK
The future of payments 23
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Sometimes an idea that sounds great in
the boardroom simply doesn’t translate
into the real world. The mobile app
revolution, for example, has seen a deluge
of apps from brands and retailers anxious
not to miss out on the ‘next big thing’.
Often these apps fail to meet the actual
needs and habits of real people, or are
more time-consuming than the method
they have sought to replace.
So it is with payments. There is no point
in introducing a new way to pay, if it
does not take into account the users’
preferences and needs.
By identifying the different types of
consumers, their concerns and preferences
and the different types of purchasing
occasion, we have provided a framework
on which technology firms, consumer
goods manufacturers, retailers and
payment providers can build a winning
strategy for engaging consumers with the
payment methods that suit them best.
Turning knowledge into action
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The framework presented in this brochure will be helpful to
any organisation that is planning a new or updated payments
strategy; however, even greater value can be gained from the
comprehensive data set gathered from the research.
To unlock the detail, and to find out how TNS can help to drive
the growth of your business, contact:
Phil Sutcliffe
Board Director, TNS UK
020 7656 5569
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t +44 (0)20 7656 5294www.tnsglobal.comTwitter: @tns_uk
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