The financial services sector is changing quickly in these pandemic times. From the elevation and adoption of digital first strategies to the adoption of buy now, pay later, the way we use and interact with our money is not the same as it was two years ago. And, according to Visa CEO, Al Kelly, this is only the beginning of our new financial future.
Kelly, who was interviewed on American Public Media’s Marketplace on December 1, 2021, shared an interesting statistic that demonstrates just how quickly consumers and merchants are embracing digital first strategies. Prior to the pandemic consumers used their debit cards to make purchases and withdraw cash at approximately the same rate. Now, 22 months into the pandemic, there’s a 20 point difference between in those numbers, in favor of purchasing. As Kelly noted, “[T] hat kind of digital-first mentality on the parts of the American consumer and merchant is going to continue to accelerate.”
So, what else does Kelly see happening in the financial services sector as a result of the pandemic?
The other big trend he wanted to talk about was the rise of buy now, pay later options for consumers. The early pioneers in the space, like Klarna, have been joined by myriad competitors, including Visa, to offer consumers the ability to pay for goods in installments but without credit checks or interest payments. While the trend is easy to understand since it makes it easy for merchants to attract and add new customers, Kelly cautioned that while it’s good for business in the short term, someone will eventually need to pay for the service in order for the banks, backing the service to make their share. “[R]ight now, these models are largely funded by the merchant on the belief that they’re getting an incremental customer,” Kelly explained. However, he continued, “[i]t’s one of the things we’ll all have to watch very carefully. It’s very possible that over time, where the consumer has to pay the higher interest rates for the service. … These companies are in the business of making money, so somebody is going to have to provide the economic flow to allow this kind of offering to continue and to grow in the marketplace.”
Want to hear more from Al Kelly and Marketplace’s Kai Rysdall? You can do that here.