Mass spending on cleaning supplies, toilet paper shortages and getting groceries delivered: COVID has altered our economy and spending habits in more ways than one. However, it also seems to be altering how we actually spend our money.
The status-quo payment methods have quickly been uprooted by COVID closures and fears — so much so that there’s actually a national coin shortage.1 Here’s a close look at the payment methods that have taken the forefront during this pandemic.
The percentage of Americans viewing contactless payment as a necessity has jumped in response to COVID-19.2 Fears of contracting the virus from the surfaces of cash, credit and debit cards subsequently led to the rise of touchless pay.
What Is Touchless Pay?
Contactless payment systems allow consumers to make payments without, as the name suggests, having to make physical contact with a machine or person. Certain banking and card systems offer contactless pay as an amenity, while methods such as Apple Pay have already been utilizing touchless pay since the beginning.
Advantages and Disadvantages
Touchless pay is extremely efficient and safe, but there are some drawbacks to consider: they’re especially susceptible to fraud since they don’t require a PIN number, and many places still don’t have the technology for contactless payment, which carries the risk of being unable to pay for things.
Believe it or not, the pandemic has marked a debit card revolution. According to Visa, debit card usage has surged during quarantine months while credit card usage has fallen.3 Debit cards, of course, link directly to your checking account and spend money in real-time.
Why the Increase?
The pandemic has fostered a period of chaos and uncertainty. As regular life continues to shift, people perceive debit cards as more reliable: they directly connect with available funds and don’t pose the risk of unexpected credit card debt. In addition, many contactless debit card products have been rolled out during the pandemic.
Next to credit cards and debit cards, digital wallets are the most popular online payment method used during COVID-19 - and as nervousness continues to surround in-person shopping, eCommerce is booming.4
What Are Digital Wallets?
Digital wallets, such as PayPal and other similar platforms, are entirely virtual systems that allow users to make purchases and store money. They’re often associated with your bank account or debit or credit card, and allow very easy payment online. Some even offer perks.
Advantages and Disadvantages
Digital wallets provide an extremely seamless payment experience, particularly online. Payment often takes only two or three clicks. They also come with increased security, particularly compared to touchless payments. Despite this, they are not accepted everywhere and can also introduce budgeting challenges.
COVID-19 has radicalized nearly every aspect of our society, especially as it pertains to the economy. Even as the pandemic passes, it’s likely that many of these changes will be here to stay—Americans have already adapted to the integration of new payment technologies, and many are now accustomed to its advantages. Don’t worry, though: cash won’t be going obsolete anytime soon.
We are a trusted fee-only financial planning and investment advisory firm to individuals, small businesses and self-employed professionals in the Akron/Cleveland area and all across the country. Please feel free to give us a call at 330-836-7000 to schedule an introductory conversation and we will partner with you to design your personal financial blueprint and build a solid foundation for a bright financial future. You can also schedule an introductory conversation with us here.
Since 2004, TCM Wealth Advisors has been providing Fee-Only Fiduciary Advice to our clients in Northeast Ohio and all across the country.