Connected devices — smartphones, tablets, voice-activated speakers, smartwatches, in-car dashboard systems — are changing how consumers in the U.S. buy and pay.
Not just some consumers, but almost all of them.
We have brand-new data that reveals how much change is happening.
Using smartphones and apps to autopay at gas stations, or to find and pay for parking, or asking a voice-activated assistant on the other end of a speaker to order a pizza aren’t just what early adopters of cool, connected tech are doing.
People of all stripes — from millennials to baby boomers, from Generation X to the Greatest Generation — are increasingly swapping the friction of shopping in a store for the convenience of using one of the many connected devices they now own to shop and buy from instead.
That includes many of the things that were once only possible — and therefore largely purchased — in a physical store: things like groceries, prescriptions and clothes.
Saving time is what’s driving this shift — a shift that is now certainly nearing its tipping point — as consumers are leaning into the buying and payments experiences that accommodate their busy lives. Omnichannel — the buzzword many use to describe the consumer’s digital shopping journey and use to plan their product roadmaps around — is now a woefully outdated concept to describe what’s really going on.
The consumer’s shopping journey isn’t just moving from physical to digital. The consumer’s journey is increasingly decided by the connected devices they own and where they are when they want or need to make a purchase.
For consumers, commerce is about convenience. Increasingly, that comes by way of a connected device and the payments experiences it powers. Voice is changing those options and that experience dramatically.
In collaboration with Visa, we studied 2,800 U.S. consumers who statistically represent the composition of the adult population in the country today. We asked those consumers a number of questions about the connected devices they own and how they use them to buy and pay for products and services. As part of that exercise, we also asked them to tell us what they bought over a seven-day period, where they were when they paid for those things and what devices they used to make those purchases.
We published our key findings today in the How We Will Pay 2018 Edition: A Week In The Life Of The Connected Consumer.
This is the second year of our work with Visa, so we were eager to see the change in consumer behavior from last year to 2018. And, boy, have things changed. I’ll leave it to you to dig into the full report for those nitty-gritty details.
They give rise to five key eye-popping insights that will — or should — reveal the strategies of everyone in the connected payments ecosystem that powers a growing portion of consumer spend.
The connected consumer is just about every consumer.
George Bernard Shaw was quoted famously as saying that youth is wasted on the young. That may be, but the use of devices connected to the internet and the apps that enable payments surely isn’t.
Not only is it the case that virtually no one from our study owns just a smartphone (3.1 percent), the vast majority of consumers (80 percent) own something other than a smartphone, laptop/computer or tablet. That’s up from 75 percent last year.
Those who own six or more such devices — we call them the Super Connected — now total 36 percent of that group, up from 23 percent in 2017: a 53 percent increase. More than half of the Super Connected are women (57 percent). The average age of the Super Connected consumer is 42 — younger than the median adult population in the U.S., which is 47, yet nearly two decades older than the young millennials, who were once thought to have cornered the market on connected device ownership.
It was also interesting to see how many Gen X’ers and baby boomers also own six or more devices — 40 percent and 24 percent, respectively.
The ownership of these devices and their ease of use is driving connected payments use cases across all age groups and generations for things that might have once been considered a clunky digital experience.
Soon, that might be the other way around.
We observed in our study that more than half of consumers used them to make a purchase in seven of the 13 categories we queried: 28 percent said they bought clothing and accessories, and 20 percent said they bought groceries. That’s up sharply from 2017.
And by “them,” we mean any number of connected devices: smartphones, computers, tablets and voice-activated speakers. Connected payments experiences are no longer the domain of any single device. We observed the same consumers making purchases using many of them.
Connected devices are accelerating the shift away from physical stores.
We observed some interesting behaviors for the seven days we asked consumers to tell us what they bought and how they paid for those purchases.
With one exception (groceries), consumers were more likely to buy online than they were to buy from a physical store. Specifically, 63 percent of consumers visited a store to purchase food to eat at home, but for all other types of purchases, fewer than 50 percent of the consumers we studied went to a physical store to make a purchase.
The Census data that reports that 90 percent of purchases still happen in the physical store misses the impact of connected payments experiences and why consumers use them to buy things.
The catalyst for the shift away from the physical store is to save time: the convenience of not having to visit a physical store to make a purchase or using a connected device to make the payments experience in the physical world better and faster. Seventy-eight (78) percent of the consumers we studied said saving time was the key reason why they used a connected device to buy something.
Using connected devices to “autopay” was most prevalent in the areas where checkout is friction-filled and time-consuming: paying for gas (49 percent), paying for clothing (41 percent), paying for parking (40 percent) and paying the check at a restaurant (39 percent).
One-third of the consumers we studied also expressed an interest in using these devices to pay bills; that’s up from 10 percent last year.
Saving time and eliminating payments friction in-store is also driving consumer interest in using contactless cards. Twenty-six (26 percent) of consumers said they were “very” or “extremely” interested in using contactless cards to pay at checkout, with 84 percent of those consumers expressing interest in paying that way at grocery stores, 79 percent at quick-service restaurants (QSRs) and 72 percent with mass transit.
Voice is the payments gamechanger.
The ownership of and use of voice-activated devices is changing how consumers pay in ways that even a year ago seemed unimaginable. Voice-activated devices have been in the market for only four years, but the skills and the skills ecosystem that powers commerce via those devices is younger still.
Those who think that voice isn’t catching on for commerce should probably think again.
The number of consumers in our study who reported owning a voice-activated device nearly doubled from last year to this year — with 27 percent owning one, which is almost double from 14 percent in 2017.
Perhaps even more striking is the number of consumers who said they used them to make a purchase: 29 percent of the 27 percent of voice-activated device owners reported using them to make a purchase.
To say that voice — the most intuitive and easy-to-use payments enabler there is — is a payments gamechanger is perhaps stating the obvious.
To say that it’s a fast-moving train that will power payments should now be obvious too.
Consumers are using their voice-activated assistants to turn tedious, routine shopping experiences into connected payments timesavers. Twenty (20) percent of consumers who own voice-activated, connected devices use them to buy groceries, 22 percent to buy digital goods, 15 percent to order takeout and 28 percent to buy clothing and accessories.
Trust is the connected consumer’s “North Star.”
Making the leap to connected devices and connected payments experiences is something the consumers in our study certainly have made with both thumbs (plus the sound of their voice). All that said, the more abstract these connected payments experiences become, the greater the concern over the security and privacy of their data.
For the consumers we studied, data security and privacy are two sides of the same coin — a coin they say could tarnish, if their experience when using a connected device is compromised in some way.
This year, 79 percent of all consumers said concerns over data security and 78 percent said concerns over data privacy could inhibit their use of connected devices to make purchases. That’s up 11 percent and 3 percent, respectively, from last year.
The operative word here is “could.”
Today, consumers are still using the devices that power these payments experiences. And it can be argued that they will only use them more tomorrow. That paradox appears to influence who the consumers in our study say they trust to enable those experiences. Not surprisingly, it’s the same list of providers consumers turn to and use today.
Nearly 60 percent (59.1 percent) say they trust their bank/card networks, with card networks (55.3 percent), Visa (41.9 percent), Amazon (37.1 percent) and PayPal (35.6 percent) rounding out the top four.
To track how we will pay, watch how Bridge Millennials pay today.
Bridge Millennials are the 20.7 million consumers that, as their name suggests, bridge the gap between the younger millennials and Generation X. We first discovered this group earlier in the year when examining the results from a consumer study about the purchase behaviors surrounding clothing and accessories.
Our hunch then was that there was a marked distinction between how a 25-year-old used connected devices to shop and to pay and how a 35-year-old might do the same.
What we discovered is that there is — and here’s why.
Bridge Millennials are settled into a stable career, have made a dent in paying off their student loans and are settling down with a partner and perhaps even starting families. Their increased earnings power gives them spending power that younger millennials lack — a spending power nearly equal that of their Gen X elders.
But this is also the generation that came of age with connected devices in their hands, using them to do everything from checking social networks and sending money to their friends, to buying things using mobile devices. Using devices with apps that have payments features embedded in them is, therefore, second nature.
Half of all Bridge Millennials are Super Connected, and, in total, these Bridge Millennials account for 29 percent of the entire Super Connected group. They also own more voice-activated devices than any other group of consumers in our study. They use these devices more frequently to make purchases: Forty-two (42) percent of Bridge Millennials own voice-activated devices versus 27 percent of all consumers in our study. Thirty-two (32) percent of those who own those devices use them to make purchases, compared to 28 percent of all consumers in our study.
Bridge Millennials are also more comfortable using a connected payments experience to make purchases once largely done in the physical store, from groceries and personal care items to jewelry and automobile parts. In fact, 59 percent of Bridge Millennials use a variety of connected devices to make purchases, and 17 percent did so with voice-activated devices.
This compares to 53 percent and 11 percent of the consumers we studied.
That makes the Bridge Millennials the first generation of connected consumer with real spending power and the bellwether for the connected generations that follow.
How we will pay … will be more of how we pay today.
Payments innovators like to talk about innovations that help consumers bridge the physical and digital worlds.
That’s not how consumers think about their shopping journeys, and neither should we.
Consumers don’t think of themselves as moving between the physical and digital worlds as much as they now expect to use the connected devices they own as tools to make their buying and payments experiences more efficient.
That’s particularly true for the things they buy today that require so much of their time: groceries, clothing, beauty products and prescriptions — even paying bills.
The devices that have become an indispensable part of the consumer’s daily life are becoming an indispensable part of how they will pay.
Of all the potential use cases we studied, those that include “autopay” experiences were the most preferred by the U.S. representative sample of consumers. That is a sign of how comfortable consumers are with those payments experiences and the value they place on their time when they use them.
There’s no turning back.
How we will pay is via the devices consumers own and the connected payments experiences they will continue to power.
Who we pay will be determined by those best able to create and deliver those efficient and secure, connected payments experiences.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
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