Introducing the Digital Now

All your customers are digitally demanding 

Digital transformation has been on the collective agenda for years. 

The concept is not new - it’s been impacting the world and driving growth and innovation long before COVID-19. Contrary to popular opinion, the pandemic hasn’t been so much of a catalyst for digital transformation as the ultimate test of business buoyancy and agility in unsettled times.

The transformation that was already happening may now, thanks to the pandemic, be happening even faster. Businesses that failed to prioritise digitisation before 2019 haven’t just lost the race, they aren’t even in it. The impact of the pandemic is undeniable. It has, according to the 2020 McKinsey Global Payments Report, not only compressed a half-decade’s worth of change into just a few months but also had a profound effect on areas that are typically slow to evolve, such as consumer behaviour1. But this is not just another piece of research dedicated to its accelerating effect. 

The reality is far more interesting.

As the results of this new survey reveal, the pandemic has served to increase the adoption of behaviours that were ALREADY gaining traction. The fact is that your customers’ behaviour isn’t changing, it’s already changed.

Gone are the days of analogue consumerism. The digital consumer is here and (SPOILER ALERT) we’re not just talking about digital natives (those who were surrounded by technology from their birth in the new Millennium). The survey shows that older generations have broken free of the digitally dismissive stereotype and the results have uncovered overarching, intergenerational behaviours and expectations.

Our research shows that your customers already have high expectations around the speed and delivery of payments. Digital payment experiences are already an intrinsic part of everyday life, with 44% of people surveyed using mobile or online banking services on a daily basis.

Customers of all ages now expect instant payments, instant receipts and super-easy processes. In fact, the majority say there’s no excuse for brands not to offer the same kind of instant services they enjoy in other areas of their life, as slickly delivered by the Ubers and the Amazons of the world. Even the most technologically sceptical among us are now open to using new financial services or payment methods that make things quicker and more convenient.

These expectations are high across the board, spanning both gender and age. Attitudes that many of us might expect from 18-25 year-olds are shared (and in some cases more widely held) by 40-65 year-olds and those in the 65+ bracket. The overwhelming consensus is that the digital world needs great digital experiences. And that’s a view held by young and old alike, regardless of whether they consider themselves sceptical or enthusiastic adopters of technology.

But while an amazing CX nowadays invariably means a digital one, digital doesn’t always mean a good CX; it’s simply the latest iteration in the customer experience evolution. The stickiness of these behavioural changes will depend entirely on the satisfaction of these new experiences. At the moment, only a third of people surveyed see any type of online service provider fully meeting their expectations when it come to the processes that make or break the customer experience - the payments. Optimising this experience and taking full advantage of the considerable opportunities that this new normal presents is the next digital transformation frontier.

In this eBook, we’re going to help you to navigate this new digital landscape. And, while the survey showed that more than half think we’ll have an almost cashless society within five years, we’re not just jumping on the ‘death of cash’ bandwagon (possible but not probable in the immediate future in our opinion – think less-cash as opposed to cashless). Instead, we’ll look at what we know now about the digitally demanding audience, who they really are, what they really want and how to attract and keep them. We’ll also explore the very different obstacles and opportunities that the Digital Now offers to both challenger companies and more traditional, incumbent organisations. And we’ll give you the recommendations you need to please your digitally demanding customers.

It’s time to stop thinking of the digital future and start catching up with the Digital Now.

Click the image above to view in browser. Or access the entire survey results here.

Your challenges will depend on how digitally evolved you are.

COVID has exposed the risks to businesses of neglecting investment in digital technology. Those who started the digital transformation process pre-pandemic were better able to pivot and adapt to a world in which digital was central to every interaction and transaction – those who didn’t lagged behind customer expectations.

How brands navigate the Digital Now will largely depend on where they are in their own digital evolution.

While the digitally-native challengers may have less work to do in terms of their critical infrastructure, the post-pandemic world holds challenges for all.  The results of this survey blow many commonly-held assumptions about consumer expectation and digital readiness out of the water. It shows that the digital revolution wheel has well and truly turned and it’s no longer just the young that are in the driving seat.

Traditional incumbents who may have been cautious about a digital-led proposition for fear of losing wealthier older audiences or fear of compromising their services need to rethink their strategies. The results suggest that customer resistance to digital is no longer a barrier to change, SO LONG AS it increases customer convenience and/or control. These audiences have digitally evolved and the chances are they are already one step ahead. There is a collective appetite and interest around digital payments with almost half seeing themselves as innovative or enthusiastic in their adoption. 

Click the image above to view in browser. Or access the entire survey results here.

41% have opened a new bank account or started using a new financial service app in the last 12 months. Yet, despite this willingness, the majority still only have a traditional bank or building society account (65%) and issues of trust are high on the collective agenda, with most feeling more at risk from online fraud today.

Traditional companies wanting to compete in the Digital Now need to be as innovative as the start-ups, and the innovators as trusted as the incumbents. And everyone needs to rethink what they know about their customers.

For businesses across the board, this new reality presents both opportunity and risk. This eBook will give you the formula for success while outlining the key actions you need to take depending on where your organisation is in terms of its own digital evolution.

Key Findings – what we know about the digital now

There is a generation that no business can afford to ignore.

There may be commonly held assumptions that the younger digital native generation is generally more connected, more switched-on and more tech savvy than older age groups but is this really the case in this digital age?  Afterall, digital technology has become an integral part of everybody’s existence.

So, we decided to dig deeper into the world of consumer behaviour to see what people really felt about the payments experience and to challenge or substantiate our own assumptions about who the digitally demanding customer really is. We commissioned a quantitative survey of over 2,000 people, of all ages, and there were certainly a few surprises. We also asked them to tell us about their level of digital enthusiasm, to make sure we weren’t interviewing those who were enthusiastic. The results confirmed that attitudes to digital finance and customer experience expectations no longer run along such pronounced generational lines.

And who has closed the generation gap? Look no further than the Boomers, those born between 1946 and 1964.

In our survey, the 65+ cohort is now most likely to expect digital payments to be instant and convenient. They are also the demographic who most felt that outdated and inefficient payment processes undermined their experience as a customer. And they most strongly agreed with the statement ‘there is no excuse for online brands to have outdated, inefficient payment processes’.

Click the image above to view in browser. Or access the entire survey results here.

What’s more, the majority of those aged 65+ said there had been no change in their expectations in the last 18 months, meaning that this discerning demographic has been setting the customer experience bar high, for quite some time. But perhaps this isn’t really so surprising. After all, this was the first generation to experience the radical changes brought about by computerisation. We’re talking about the people who were in their 30s when Amazon launched. They’ve gone from cheques to debit cards to online payments to contactless payments, and they know what good service looks like.

As a recent white paper suggests, Boomers combine formidable spending power with a thirst for fresh life experiences2. A Financial Times article shows the extent of the intergenerational wealth inequality, with the Boomers being the group that have experienced the greatest increase in their household wealth during the 2006-2016 period, with a rise of 96 per cent, and one in five being millionaires. 3

We set out to look for the ‘digitally demanding’ customer. What we found was that all age groups were digitally demanding, but with the more youthful being more ‘digital’ (as they’ve grown up in a digital world) but also less financially aware/interested. Meanwhile, the older generations are more ‘demanding’, with stronger financial awareness and expectations as a result.

With money to spend and high expectations, those aged 65+ are the generation that no business, FinTech or otherwise, can afford to ignore.

Less cash; more digital

ATMs and wallets may well be losing their currency with more than half of those surveyed (56%) who think we’ll have an almost cashless society within five years. We believe the reality is likely to be further away than this statistic would suggest, but we do think it’s significant. What we think is more likely, in the immediate future at least, is considerably less cash as opposed to cashless, as cash continues its lengthy handover to digital payments.76% are using ATMs to withdraw cash far less frequently than a year ago and two-thirds (65%) say they often have no cash on them or at home. While the 65+ age group are the cohort most like to have cash, they are also not shy of a digital wallet - 67% have used a digital or mobile wallet in the last 12 months or would consider doing so.

More than half of those surveyed said they enjoy or would enjoy being able to leave the house without a wallet or purse because they can pay with their mobile (58%). And 76% would prefer to repay a friend £500 digitally than with cash, 57% say the same to repay a friend £5.

Click the image above to view in browser. Or access the entire survey results here.

Contactless has been widely embraced by consumers of all ages, but most notably amongst the 65+ demographic. An impressive 93% of those aged 65 or over have used contactless in store in the last 12 months or would consider doing so.

And, 70% of people say that, due to the convenience, they plan to continue shopping online even though shops have re-opened which suggests that these intergenerational consumer behaviours will outlast the pandemic. 

So think less cash, more convenience. Less cash, more control. Less cash, more digital. And more opportunities.

Digital payment expectations

We live in a world of instant gratification. We've all been Netflix'd, Amazon Primed and Uber'd and have all come to accept ultra-seamless, on-demand, real-time experiences as the norm.

The Instant Economy, a world of instant experiences driven by instant services and instant information, is increasingly becoming the benchmark for customer experience.

Even before COVID, the lines between our personal and professional lives were becoming increasingly blurred. Our work life and home life are no longer two separate entities - 73% of those surveyed expect the same instant and convenient payment experiences both at work and in their personal life.

And 61% say these expectations have increased in the last 18 months. When asked why, 47% of those aged 65+ cite the accelerating effect of COVID, while the 18-25s were most likely to say that they were lazy with payments and wanted things as easy as possible.

While the overwhelming majority of people (82%) say they expect digital payments to be instant and convenient, those over 65 have the highest expectations for an instantaneous payments experience.

When sending or receiving money nowadays, nearly half (49%) expect payments to be processed instantly.  Those in the 18-24 age bracket were most accepting of longer processing times.  And, when it comes to confirmation of receipt, 37% expect to get confirmation of payment instantly, and 14% within 10 seconds.

Click the image above to view in browser. Or access the entire survey results here.

And who’s meeting these payment expectations to the greatest extent? Interestingly, it’s the online communities like Amazon, Ebay and Deliveroo, with their embedded financial services offerings, that are pipping the banks at the payment post. While the tech giants such as Google and Apple get only 26% of the collective vote.

Click the image above to view in browser. Or access the entire survey results here.

Either way, no more than a third of people see any online service provider type fully meeting their expectations around payments or money transfer.

Which means providers either need to encourage consumers to downgrade their expectations or they need to up their game. And good luck to anyone who tries the first approach.

Digital payment problems and pain points

Payments are the ‘last hurdle’ in the online customer experience with problems here causing much frustration, with 65% of those surveyed agreeing that digital payment problems create unnecessary stress for customers. Problems range from having to wait for refunds, needing to find additional information or a card to pay with and being transferred away from a website to make payment. More than half have stopped buying from a specific brand because of poor payment experiences

Top 5 digital payment issues

  • Having to wait for a refund (64%)
  • Having to find additional info or a physical card to pay (59%)
  • Transferred away from website to make payment (57%)
  • Payment process has too many steps / feels clunky (54%)
  • No / delayed notification that payment has gone through (51%)

Click the image above to view in browser. Or access the entire survey results here.

And what’s the consumer response to these payment pain points? 44% of people say they simply abandon the transaction.

53% say they have stopped buying from specific brands because of problems or poor experiences with the payments. While 65% say digital payment problems create unnecessary stress for customers.

Click the image above to view in browser. Or access the entire survey results here.

Most (60%) feel that the responsibility for digital payment problems lies with the consumer-facing brand as opposed to the payments provider, so if you’re not partnering with the right provider, it’s your brand that will pay the price.

While paying that price may not be instant, you could be feeling the effects for a long time.


Payments: Pain points or people pleasers

Payments are critical to customer experience, occurring at the time when the customer, having evaluated your proposition, acts on the buying decision. Failure to recognise the importance of these processes may result in businesses losing customers and cash flow at this critical juncture.  44% of those surveyed said they would abandon the purchase or payment and use another App or website when payment issues occur or processes fail.

Click the image above to view in browser. Or access the entire survey results here.

But it’s not just losing customers in the buying journey that brands should be concerned about. Our survey shows that digital payment problems have an emotional impact; with 71% of consumers surveyed saying the payment experience can ‘make or break’ their future relationship with a brand. 72% say outdated and inefficient payment processes can undermine their experience as a customer and the tolerance threshold is low, with 78% agreeing that there is no excuse for online brands to have outdated, inefficient payment processes.

Having to wait for a refund is most likely to make people feel frustrated or angry (40%), having their preferred payment method not accepted is most likely to make them feel disappointed or let down (34%), and they are most likely to get anxious or stressed when a payment method doesn’t feel secure (46%)

Click the image above to view in browser. Or access the entire survey results here.

Issues of security and trust are high on the collective agenda. As the world becomes more reliant on digital services, 71% personally feel at greater risk from online fraud than 18 months ago. This sentiment is felt most acutely by the younger demographics (although this may have as much to do with their heightened general awareness of digital threats as opposed to deep-rooted concern). Although it is notable that those in the 18-24 age bracket were also most likely to describe themselves as ‘average’ in their adoption of digital payment services – stating that they tend to use them when most people they know already use and trust them; a statistic which has further served to level the playing field when it comes to intergenerational attitude.

And what are the top three situations that lead to those surveyed feeling vulnerable to online fraud and identity theft? The most cited reason was a lack of security certificate (77%), followed by no clear indication of a payment provider (74%) and being transferred outside the App or website to a third-party payment provider (72%).

Click the image above to view in browser. Or access the entire survey results here.

Trust is the cornerstone of any customer relationship and there is much to be gained from investing in your payments platform - 77% say they are more likely to trust a brand that invests in modern, customer-friendly payments processes. And 53% say that a trusted payments experience would encourage them to use the online service provider again and reward them with their loyalty.

The Obstacles and Opportunities for Challenger Organisations

If your organisation has a digital-first proposition, then now is a time of huge opportunity for you. After all, start/scale-ups are often in a better position to adapt quickly than larger, older organisations. But taking full advantage of that opportunity still brings its challenges, and they may not be the ones you were expecting.

If, like many FinTechs, you’ve been concentrating on a customer base of digital natives and innovators then, as these results show, your audience is potentially much wider and you’re missing out by ignoring older generations.

18-25 year-olds are the easy wins. They are the first adopters, the low-hanging fruit. Challengers will have to work harder to develop their proposition and appeal to older generations. But, as this research shows, consumers of all ages will gravitate toward brands that provide the most convenient and trusted user experience. So if your social plan is limited to TikTok, you probably need to rethink your strategy at the very least.

FinTechs are uniquely placed to address the issue of lack of trust, based as they are on the premise that they can make finances simpler and more transparent for all. But there are less clearly-defined trust factors such as issues of perceived authority and social proofing that could also be incredibly helpful to you while you grow your audience.


The Obstacles and Opportunities for Incumbents

Whereas innovators have the benefit of digital responsiveness, many incumbents enjoy the institutional advantages that years of having a physical high street presence bring.  But, while this familiarity may have led to more trust amongst some audiences, this is a legacy of a bygone, more bricks-and-mortar era. Having an impressive edifice is less relevant in a digital world (unless we’re talking about Minecraft). Nowadays, we have all become far more familiar and comfortable with downloading apps and linking to our bank account. As our survey reveals, every age group is now open to using new financial services or payment methods to make things quicker and more convenient- even those who are older or describe themselves as technologically sceptical.

Many incumbents are struggling to keep up with the pace of technological change and rising customer expectation; hampered by a legacy of costly and cumbersome technology. They are dealing with the significant overheads of running their own payments infrastructure together with all the associated project costs, resources and time required to build, manage and operate either indirect or direct payment scheme access. So being behind-the-times isn’t just off-putting to customers – it's probably a more expensive way to run your business as well.

Without the modern API platforms that drive the Instant Economy, they are being left behind in the wake of more flexible, responsive, technologically switched-on FinTechs and challengers whose disruptive solutions have raised the bar when it comes to customer expectation and experience.

Traditional financial institutions need to build innovative and instantaneous customer experiences into their proposition but, choosing the right digital infrastructure to support and enable these experiences is critical to success.

Embedding custom-built solutions into core banking systems enables such organisations to reimagine their technology stack without paying to reinvent it. Switched-on incumbents realise that they’ll miss out on new features if they try to retrofit current practices and processes, and later we’ll tell you more about how working with the right partner can help you to enact this change (cough, cough Modulr).


The Formula for Success: Top 5 elements for the ideal payment experience Open lock

So, whether you’re a challenger or an incumbent, if you’re looking to build payments experiences based on consumer attitudes to digital finance and customer experience then, based on our research, there’s a clear formula for success:

Ideal payments experience = instant + convenient + responsible + trust + control 

Read on to find out how to solve this formula and reap all the rewards that the Digital Now brings.

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