Digital payments transformation touches consumers and merchants

In a time of continuous change, how is the payments landscape evolving, both for consumers and merchants?


6 minute read

Key takeaways

  • Growth in digital payments has exceeded expectations, with some 82% of Americans using cashless technology in 2021.
  • Consumers are driving multiple payment options and the digital experience in an ever-expanding global marketplace that is erasing international borders.
  • Merchants adapting new digital payment methods can gain more speed, more data, enhanced security and fewer declined transactions.


Growth in digital payments has exceeded expectations

What started with in-person improvements, like contactless “tap and go” cards or the ability to scan a mobile phone at checkout, has accelerated exponentially. Some 82% of Americans used a form of digital payment in 2021, according to a Digital Payments Consumer Survey from McKinsey. Any company that transacts with consumers must navigate the move away from cash, checks and even physical cards to a widening assortment of digital payment options. These include payments made via:


  • Merchant or brand websites, apps and reward programs
  • Third-party ordering or delivery services
  • Peer-to-peer payments like Venmo, PayPal or Zelle®
  • Digital wallets like Apple Pay


Some of these are still facilitated by a card, while others are electronic ACH payments, with money drawn instantly from the buyer’s bank account. Some of the newest options offer one-click payments on social media and streaming sites—like Facebook Pay, a “buy now” button that allows online shoppers who see a promoted product they like to buy natively on the social platform, rather than clicking through to a brand or retailer’s website.


A pie chart showing 82% of Americans paid digitally in 2021


It’s a “commerce anywhere” world

Increased buying opportunities mean a push for speedy, uncomplicated, always-on options. “Consumers are driving that choice,” says Galen Robbins, Head of Global Merchant Acquiring Sales at Bank of America. “As a customer, you seek things that are easy, that enable you to get what you need done with the least amount of action and expense. Consumers are driving multiple payment options, the digital experience, and merchants are responding in ways they’ve never had to before. They’re leaning on Bank of America to provide them those alternatives, those gateways, those other means of capturing and retaining a client’s payment information in a frictionless way.”


Robbins says Bank of America itself has innovated in response to its own retail banking customers’ preferences. He says, “Even compared to just five years ago, the choices that we give a client to interact with the bank—whether it’s to make a payment, or to transact their financial services business through the banking centers, through or through Merrill Edge®—are huge and the choices they expect from us are equally huge.”

“Consumers are driving multiple payment options, the digital experience, and merchants are responding in ways they’ve never had to before.”


Consumers have embraced paper to digital

Robbins believes the move to digital payments benefits consumers, who enjoy a smooth, effortless process, with many digital options. They enter their information once and use that for all future purchases. And options like one-click order systems or peer-to-peer payments make the payment process feel less transactional, and more about the customer’s connection to the brand, retailer or friend. Today’s options enable almost everyone to be digital, even the 7% of American adults who remain unbanked have the option of using a phone to pay — “and virtually everyone has a phone now,” Robbins says.


Merchants win through better data, security and processes

For merchants, the switch to new digital payment methods can pay off in multiple ways:


  • More speed: Getting the cash and the checks out of the system speeds payments, provides faster reconciliation and reduces labor costs and processing fees, Robbins says.
  • More data: Digital transactions and digital payment platforms can generate data for merchants, allowing them to harness the important marketing trend of personalization (while still being mindful of customers’ privacy concerns). “Merchants gain an edge when they are able to retain customer data,” says Robbins.
  • Enhanced security: Robbins says in addition to tokenization, other advanced, digital fraud prevention tools have been developed. Merchants willing to deploy these state of the art services will make transactions more secure irrespective of payment type.
  • Fewer declined transactions: Digital payment systems and the data bases they create and access can help merchants and banks cut down on the number of declined transactions. “A huge percentage of declined transactions are from invalid card data, like replaced or expired cards, for example,” says Robbins. “With a digital payment, if the system recognizes a transaction was declined, it can go into the database to see if the customer has current card data and, if so, resubmit the transaction with current card information to obtain a transaction approval. That saves the sale for the merchant, avoids customer service interruptions and allows the banks and merchants to focus on the actual bad actors.”


Digital payments are not just for traditional retail operations. Bank of America has worked to create a similar payment system in healthcare, with a healthcare-specific portal designed to enable digital, paperless, contactless options to pay. “The gateway allows the healthcare customer to swipe a card or store their payment information, so that it becomes part of the patient’s permanent record, integrated with the hospital system, the provider and the insurance company,” Robbins says.


A fast-moving payments world

What comes next? “The pace of change is incredible. I almost think that we are getting to a place where changes happen monthly, so we have to think about digital advances in the context of months, not years,” Robbins says. “We will have a conversation a year from now and I’ll be telling you 20 other things that we’re doing that we didn’t do 12 months ago,” he says. “That’s how fast the pace is changing.”


Galen Robbins | Head of Merchant Acquiring Sales, Bank of America

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