North America has traditionally been a global innovator, consistently at the forefront of payment technology as well as retail and financial services. The region has relied heavily on the stability and convenience of its well-established payments infrastructure, which has helped foster a culture of predictable payment habits.
This, however, has also contributed to an entrenched dependence on credit and debit cards, creating the potential for significant disruption. Developed over decades of habitual use, North American consumers have a strong attachment to credit cards.
The leading payment preference in e-commerce purchases, they account for a third of online spending. As digital and mobile wallets continue to integrate into the checkout experience, and the need for physical cards lessens, the Global Payments Report estimates credit card use in e-commerce gradually declining to 27% of consumer spend by 2023.
At the POS, credit cards continue their long reign of dominance with 40% of consumer spend in 2019. Overall, the report expects credit will still earn 42% of the POS in 2023, which is expected to approach $5 trillion by that time. For Canadian consumers, credit cards remain the overwhelming choice, accounting for 51% of POS and 60% of e-commerce spend while American consumers split their payment preferences between several different methods.
In the next five years, much of that credit card spend will migrate into mobile and digital wallets. As smart devices become inseparable from the tasks and habits of daily life and generational familiarity only reinforces their use, digital/mobile wallets are poised to find widespread acceptance. They have risen from 20% in our 2018 report to account for 24% of regional e-commerce spend in 2019.
The report projects digital/mobile wallets will soon overtake credit cards to become the leading online payment method to account for 37% of North American e-commerce spend by 2023. The growth of digital and mobile wallets at POS is no less dramatic, rising from 3% in 2018 to 6% in 2019.
Projections show the use of digital/mobile wallet will nearly double again – to 10% of POS spend – by 2023. Though a small percentage, that amounts to well over $1 trillion transacted via mobile or digital wallets at North American POS within five years.
The long-awaited digital/mobile wallet tipping point seems to have finally arrived. For consumers who prefer to spend the cash they have available, debit cards continue to deliver value for North American consumers, earning 18% of e-commerce and 34% of POS spend in 2019.
Debit is not declining in overall importance; payment market share is shifting into mobile and digital wallets and many of those wallets are linked to both credit and debit card accounts. Rounding out North American e-commerce, it is expected charge and deferred debit to experience modest declines from 11% in 2019 to 9% in 2023.
Aside from large market share gains for digital/mobile wallets, the report notes that buy now pay later solutions are gaining e-commerce share. It is expected these services – such as Affirm, Afterpay, and Klarna – will gain traction and triple their current 1% e-commerce market share to 3% by 2023.
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