From wallets to apps: The shift in payment habits

The world has witnessed a remarkable surge in digital payments over the past decade. Online payments are at the centre of day-to-day transactions, and consumers are becoming increasingly cashless. Marked by the rise of digital platforms and mobile applications, young consumers expect integrated, frictionless, and personalised experiences. Gone are the days when wallets filled with cash ruled the roost. Everything from movie tickets, meals, and even utility bills are being paid through online platforms.

The rise of digital payments

The pandemic encouraged customers and businesses alike to integrate digital technology into their everyday lives and increased the adoption of cashless payment methods. According to a PwC report, global cashless payment volumes are set to increase by more than 80 per cent from 2020 to 2025, from about one trillion transactions to almost 1.9 trillion, and to almost triple by 2030.

Moreover, a recent consumer survey indicated that 58 per cent of Middle East consumers expressed a strong preference for digital payment methods, while only 10 per cent strongly preferred cash.

This surge in digital transactions clearly indicates the shift in payment habits among the country’s youth. Digital payment platforms provide the younger generation with a convenient and hassle-free way to make payments, eliminating the need to carry physical cash or cards. Additionally, innovative add-ons and incentives such as cashbacks, discounts, and rewards make these transactions more appealing. Banks across the world are leveraging the latest technology and innovations to keep up with evolving payment preferences. As an example, we have introduced NeoPay, a paytech brand specifically designed to streamline payments for goods and services.

Financial literacy to navigate the shift

As the payment landscape evolves, it becomes essential for young individuals and their guardians to prioritise financial literacy. According to a 2022 survey conducted by Mastercard, it was found that Gen Z individuals are least inclined to use cash or make in-person transactions. Instead, they actively explore new payment options. In the UAE, 64 per cent of Gen Z are adopting new digital payment methods such as digital wallets or click-to-pay accounts compared to 22 per cent of boomers. This transformation in payment habits highlights the important role of financial literacy in ensuring that the youth are equipped to navigate these changing financial patterns. Without proper financial literacy, the convenience of digital payments can lead to impulsive spending and a lack of control over personal finances.

Understanding concepts like budgeting, saving, and investment early on can empower young adults to make informed financial decisions and avoid debt. In this regard, digital payment systems offer an array of features and functionality to help users manage their finances effectively. Some of these platforms often provide financial management tools that allow users to track their expenses, set spending limits, and analyse their financial habits, thereby empowering young users with the acumen to make the right decisions. By transforming money matters into a fun and interactive experience, these apps make financial management more engaging and accessible for the tech-savvy generation. Mashreq's NeoNxt digital banking proposition, plays a pivotal role in achieving just that. It not only empowers the next generation with greater control over their spending but also actively fosters responsible financial habits.

Kartik Taneja is executive vice-president, head of payments & consumer lending, Mashreq