New Research: Digital Payments and the New Opportunity to Increase Savings

(Charvi Gandotra, Senior Strategy and Innovation Manager, Commonwealth)

The adoption of digital payments solutions, including peer-to-peer apps, digital wallets, and contactless payments apps, has seen significant growth since the start of the COVID-19 pandemic. In fact, 59% of Americans now use more apps to manage their money than before the pandemic. However, there is limited research to understand how people living on low to moderate incomes (LMI) use these payment apps, and the opportunity that these technologies unlock to meet wider needs beyond payments to advance the financial security of these customers.

Commonwealth, a national non-profit in the U.S., fielded a survey with 648 respondents living on LMI, oversampling for Black, Latinx, and female participants, to understand their current usage of these payment apps, and to specifically explore opportunities to offer high-quality savings products within payment apps.

The findings from Commonwealth’s research overwhelmingly display high demand for savings solutions tied to these apps, and highlight the business case for product providers for doing so. Our findings are in line with global trends and leading industry research. For instance, the recent World Bank Global Findex 2021 report shows that receiving payments into an account is a catalyst for other financial services, such as relying on an account to save, borrow, and store money for cash management.

The key findings from the research are summarized under six broad themes below, and the details can be found in the full report, Digital Payments and the New Opportunity to Increase Savings.

1. Americans living on LMI have integrated digital wallets and contactless payment apps into their daily financial lives, using them to pay friends and family, pay recurring bills, and store money. Consumers demonstrate a high level of comfort and trust with using the apps, which indicates that these channels may be poised to expand to broader financial services.
2. 79% of respondents living on LMI said they’d likely use a savings solution if it were integrated into these apps, with emergency savings and saving for short-term expenses as the top savings goals. Even in the absence of core savings features, customers find a way to use the apps of their choice as savings solutions, showing high demand for a targeted solution.
3. There is an opportunity to advance racial wealth building work. Black and Latinx respondents were more likely than white respondents to be using these apps for recurring payments, and are also more likely to be interested in a potential savings product.
4. There is a strong business opportunity for providers in offering savings solutions. Customers leave more money in the app when they think of it as savings, demonstrating the opportunity of increased share of wallet and potential for higher engagement among savers.
5. Respondents were interested in savings with creative savings interventions, such as round up-savings, cash-back rewards, and discounts. Respondents prefer automation with control.
6. Intentional, customer-centered design is key for meeting needs and driving business value. Customers value trust, comfort, and convenience as attributes of a savings solution. Commonwealth’s Actionable Insights for Inclusive Product Design provide helpful resources and concrete examples to approach product and messaging development.

As the use of contactless apps and digital wallets continues to become more widespread, Commonwealth aims to encourage access to wider financial solutions such as savings and investing, which enable wealth building for people living on LMI.

Commonwealth is actively engaging with innovators, fintechs, financial services firms, industry experts, employers, and policymakers. We will also be joining FTT Embedded Finance & Super Apps on December 1^st in San Francisco to explored how embedded finance is creating opportunities to provide financial products and services that better meet the needs of consumers.

To learn more about how your solution can be designed to prioritize inclusivity and equity, and to collaborate to improve financial security and opportunity, contact Charvi Gandotra, Senior Strategy and Innovation Manager at info@buildcommonwealth.org.