the future of payments - kantar tns · 2 tns 2013 future of payments study. tns uk undertook...

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

8

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)


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


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.


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.


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




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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


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




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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.


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


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


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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

[email protected]

020 7656 5569

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TNS6 More London PlaceLondon SE1 2QYUnited Kingdom

t +44 (0)20 7656 5294www.tnsglobal.comTwitter: @tns_uk

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the future of payments - kantar tns · 2 tns 2013 future of payments study. tns uk undertook...

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