For a growing number of Americans, digital payments are the preferred method of exchanging money. Apple Pay, Venmo, and PayPal all offer unique benefits for consumers such as peer-to-peer payment options. However, digital payment adoption is slowing down due to the American consumer’s fixed consumer habits and concerns about the security of digital transactions.

Imagine that you are at dinner with your friends and the check arrives.

Tradition has it that one person splits the bill and each person chooses their preferred method of payment. Cash and IOUs are exchanged and credit cards are added to the mix.

This messy situation has been replaced by three words for a growing number of Americans:

“I’ll Venmo You.”

Money transfer apps are used by people to make payments easier online, in-store, and among their peers.

Digital payment platforms are also known as digital wallets. They can be linked to a user’s bank account or credit card. With just a few clicks, users can make electronic transactions on any device, mobile or desktop.

Digital commerce is shifting, with digital payment methods rising in popularity due to widespread smartphone use and online shopping.

Merchants are now using digital payment services to provide the seamless shopping experience that consumers demand.

Most people believe that the primary reason they use money transfer apps to send money is convenience (54%), followed closely by efficiency (20%).

Visual Objects surveyed 983 U.S. digital payment users to learn how they use digital payments.

Our research revealed that digital payments are easy to integrate into consumers’ busy lives, but they also clash with the U.S. credit system, established consumer habits, as well as security concerns.

Our findings

• People use digital payment methods primarily for convenience (54%), efficiency (20%), and security (17%).

• Nearly three-quarters (73%) of digital payment users say that they have used digital payment methods within the last five years.

• PayPal is the most popular digital payment platform (84%), followed closely by Venmo (31%), and Apple Pay (23%).

• The majority of people use money transfer apps every month (79%), followed closely by weekly (44%), less often than once per month (21%), daily (14%), and monthly (21%).

• The younger generation is most likely to use digital payment methods, with 52% of users aged 18-34 and 47% respectively ages 35-54. This compares to 24% for users 55-plus.

• Hacking is the number one concern of people when it comes to money transfer apps (41%), specifically the theft of personal financial information.

As fewer people carry cash, digital payments are gaining momentum

Digital payment platforms are growing in popularity. People don’t like going to the ATM or having to argue with their creditors.

Nearly three-quarters of digital payment users (73%) started using money transfer apps within the last five years.

Digital payments have been used by more than one-third (34%) of the population in the past 1-3 years.

Many digital payment options offer users an easy way to spend money. People can, for example:

• You can pay online for any purchase using any digital device with just one click (PayPal).

• Apple Pay allows customers to pay in-store with their iPhones instead of cash and credit cards (Apple Pay).

• Real-time exchange of money between peers (Venmo).

Money transfer apps are becoming more popular in tandem with a decline in cash usage.

McKinsey claims that it has seen a drop in global cash transactions from 89% to 77% over the past five years.

AliPay, a Chinese digital payments platform, was also ranked as the most used app after Instagram and Facebook.

This trend is confirmed by our research, which shows that only 30% of people carry cash with them all the time, while 43% use cash only occasionally or at random.

However, the U.S. lags behind other countries in adopting digital payments.

According to The Paypers Payment Methods Report credit is still the most popular payment method in the U.S. Because credit cards are so widely used, it is difficult to adopt a new payment method.

However, digital payments are becoming more popular with consumers as a means to manage their money with greater flexibility, visibility, and ease.

Venmo, Apple Pay, and PayPal are the most popular digital payment platforms

Venmo and PayPal dominate their respective niches for online transactions, peer-to-peer exchanges, and in-store payment.

PayPal was founded in the early 1990s to facilitate digital money transfers.

PayPal still holds a large market share.

When making payments digitally, most people use Venmo (31%), Paypal (84%), and Apple Pay (23%).

Users also use Google Play (16%) and Amazon Pay (11%), Facebook Messenger (11%), Square (8%) to a lesser degree.

PayPal wins established trust

PayPal’s long-standing trust with consumers and businesses is the reason for its continued dominance.

Sites can be equipped with the “Pay With PayPal” button, which allows for one-click payments and displays a trust badge to shoppers. Both of these features help increase conversions.

Venmo Gets Social Media Appeal Benefits

Venmo, which PayPal bought in 2013, also benefits from the trust of consumers and social media features.

The app’s core is a social media-esque feed. It boasts 40,000,000 users as of 2019, who can connect and settle IOUs and post what they are paying.

Apple Pay dominates in-store purchases

Apple Pay is a pioneer in in-store purchases and has a significant advantage.

Apple Pay allows you to pay in-store using your iPhone, instead of reaching for cash and cards.

Apple’s market position is based on built-in brand trust. iOS users trust ApplePay at the same level as financial institutions.

As they compete for customers’ loyalty, Venmo and PayPal will continue to use new technologies, integrations, and partnerships. PayPal is collaborating with Walmart to create ATMs for PayPal customers in-store, allowing them immediate access to their online funds.

PayPal recently announced the Venmo credit card and collaborations with Visa Mastercard, American Express, Mastercard, and Visa. When using PayPal to pay third-party merchants, cardholders can redeem points from their respective cards.

People use digital wallets that suit their needs and are trusted.       

The most popular money transfer apps are for younger generations

All demographics, but especially millennials, are seeing digital payments on the rise.

Every generation makes digital payments at least once per month.

Most users aged 18-34 use money transfer apps monthly (87%), while more than half use them weekly (52%).

The majority of users between 35 and 54 years old use digital payments monthly (79%), with 47% using them weekly. Users 55+ use digital payments every month (62%), while 24% use them weekly (24%).

McKinsey says millennials are the most tech-savvy generation and they are attracted to digital payment providers’ incentives, such as coupons, discounts, and rewards.

According to The Paypers Payment Methods Report, younger users have fewer credit cards and more debt. They also tend to be less tied to legacy payment options.

However, older users are satisfied with their existing payment methods and not interested in digital payment incentives.

Older users also spend more time and money online than younger users. This means there is a lower need for digital payments.

While millennials are the first to embrace digital payments, all generations have adopted it in some way.

Millennials are more aware of their peers’ spending on digital payment platforms

Venmo is a platform that millennials use, and they have a better understanding of financial topics. This makes them more aware of the spending of their peers on digital payment platforms.

Millennials (80%) are more likely to know how much their friends spend on online payment platforms than the older generation (65%).

Venmo is a peer-to-peer payment platform that allows users to make their transaction history public, without having to show the amount spent.

Venmo is a combination of a digital payment platform and a social media site.

“We make it default because we enjoy sharing [information] with our friends in the social universe,” stated a representative of Venmo in an interview with CNET 2018.

The representative stated that Venmo is used by people to check on their friends and family.

Venmo is the only payment platform that allows you to use emojis to punctuate your shared record and describe why money is changing hands.

Mixing finance and fun is appealing to millennials, who have mostly normalized digital payments to manage debts.

Four bank transactions are required to make a rent payment for a four-person household. Venmo makes it easy to solve recurring monthly headaches with just a few taps.

Everyone involved maintains a clear record of who paid what.

Venmo is a great option for younger users who can quickly settle their debts from anywhere. Venmo’s benefits for older users are less apparent. They tend to spend less on living expenses and social outings.

Millennials also are more comfortable discussing their finances than the older generation. They are twice as likely than baby boomers to share their salaries with coworkers.

Venmo, a tool that allows for greater transparency and money used by younger users of digital payment platforms, makes it easier to be more informed about the transactions of others.

Digital payments are not recommended due to security concerns

Data breaches at well-known businesses are becoming more frequent. People are now placing greater importance on the protection of personal and financial information. This is a major obstacle to mobile payment technology adoption.

When using digital payment platforms, we found that hacking (41%), fraud (16%), and transaction fees (14%) are the top concerns.

Pew Research also found that digital payments were less secure than credit or debit cards even among those who made them in the past year.

People reported that they avoided a payment type that they did not trust to avoid losing funds.

Even though most digital payment platforms use tokenization, encryption, two-factor authentication, and encryption to protect funds, this is not the case.

People who are unsure about the security of money transfer apps might prefer to use traditional payment methods like cash or credit cards.

It is therefore important that digital payment platforms build hardware-level security and are vocal about this when trying to attract users.

People are adopting digital payments at their own pace

Digital payments offer convenience and flexibility for people’s finances.

As people spend more time online, they find digital payments more useful, whether it’s to purchase, pay off debts, or receive payments.

Venmo and PayPal dominate their respective niches in online transactions, peer-to-peer exchanges, and in-store payment.

These digital payment apps are all strong networks but companies have to contend with security concerns and the popularity of credit cards in the U.S.

Because of their familiarity with technology and desire to be mobile, millennials are more open to money transfer apps than the older generations.

Digital payment platforms will continue to compete for consumers’ wallets. Expect new integrations and strategies to help users stay safe and encourage adoption.

U.S. consumers may soon prefer digital payments.