How Covid Changed Consumer Banking and Credit Card Use

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It has been over a year since Covid-19 restrictions were put in place around the world and, although consumer spending habits have come under close scrutiny, one neglected area has been the behavior of consumer banks. .

Financial firm FIS has investigated the impact of the pandemic on the way consumers use credit and banking and has discovered some behavioral changes. Andrew Beatty, FIS Next Generation Banking Director, joined CNBC’s “Trading Nation” to share the results.

“We did a survey that really focused on some of the differences that we see in certain events. Obviously, the switch to digital banking has been accelerated due to the pandemic, no doubt about it. for those who drive digital banking best, ”Beatty said Thursday.

This focus on digital gives context to the banking preferences of the past year. Thirty-seven percent of those polled have started a new banking relationship with a major national or world bank in the past 12 months, according to FIS – these companies have a well-established online portal. Eighteen percent opened an account with an online-only direct bank.

“Have been [also] seeing an activity that surprised us a bit, as one in five Americans opened an account last year, ”Beatty said.

Consumers may have opened bank accounts, but credit card use has fallen sharply. A generation was the big one, says Beatty.

“I would say Gen Z was really behind this. There have been dramatic drops in what we’ve seen for credit card ownership… 31% this time last year didn’t have a credit card in this Gen Z category and now it’s 55% it’s pretty important, absolutely, ”he said.

Across all age groups, 14% did not have a credit card last April. This figure has risen to 21% this year.

Financial firms should adapt to these changes in behavior, especially for Gen Z, says Beatty. Payment innovation such as “buy now, pay later” could close the credit gap for the younger generation avoiding traditional credit cards.

“Some of the strategy introductions around ‘buy now, pay later’ [are] really exciting – just a reinvention of credit, a reinvention of credit. And I think this generation will benefit from it. I think what we need to focus on is how to make it easier for them, not easier to get credit but to be accessible in the sense [if] they need it, ”Beatty said.

The FIS predicts that “buy now, pay later” will account for 4% of total global e-commerce transactions by 2024. In the United States, the FIS estimates that it will represent 5% of transactions by 2024, compared to 2% current market share.

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