The COVID-19 pandemic has had a dramatic impact on consumer behavior and commonplace activities. Thanks to social distancing requirements and changing customer preferences, many banks began promoting in earnest digital banking alternatives.

To discuss the evolving financial needs of customers and what the new normal will look like for banks and their customers in the wake of the COVID crisis, PaymentsJournal sat down with Tina Giorgio, President and CEO, ICBA Bancard and Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.

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Payment Trends

A 2019 research survey of more than 3,000 consumers looked at how they were using debit cards. Year-over-year comparisons for the past three years show that while using a debit card to get cash at an ATM and to make in-store purchases using a PIN are trending down, newer technologies, such as apps and contactless debit, are trending up. In fact, contactless debit had the most significant gain in usage between 2018 and 2019, even before the pandemic.

More recent statistics reveal adoption of contactless payments is also accelerating. At the onset of the pandemic Mastercard found that contactless transactions grew twice as fast as non-contactless transactions at grocery and drug stores. Reports from Visa indicated that 31 million Americans used a Visa contactless card or a digital wallet in March 2020, up 150 percent since March of 2019.

“I think what’s also really interesting is that Visa has noted that there have been more cards being used in a contactless environment than wallet. So for those thinking that cards might be a stepping stone to wallets, maybe that’s actually the case,” stated Grotta, “that might suggest [to issuers] that if you haven’t put a plan in place for contactless, you might want to start thinking about it.”

Giorgio agreed, adding that “The opportunity is ripe for financial institutions to create their own in app wallet. We’ve seen more adoption on credit than we have on debit, and I think now is the time for banks to really start focusing on debit.”

Changing Consumer Behavior and Opportunities for Financial Institutions

While some consumers will revert back to their old payment habits when the days of social distancing are behind us, others, having become accustomed to the new normal, are likely to continue to engage in digital and card-not-present transac...