Digitisation v Polaroid (Part 2)
The world we are being told is going digital.
Consumers, as much as they want digital, also want physical. They want to be able to touch, to be able to physically give things, to share. My daughter for instance takes hundreds of digital pictures, but plastered on her wardrobe are all these small Poloroid images from her instant Fuji camera. She can’t be bothered with a printer to print out her digital images when she wants something now, she uses Poloroid. And that perhaps is the thought; sometimes consumers want physical gratification instantly.
I raise these points as what does it tell us about for instance the virtual gift card market v the physical one. In 2015 gift card sales in the U.S. reach $130 billion, a 6% increase on the year before and are predicted to reach $160 billion by 2018. E-gifting had the largest increase, rising to 26% in 2015, representing $7.1 billion in volume – but that is only circa 5% of the market. CEB Tower Group say that the long-term prospects for e-gifting remain promising as more payment services become mainstream and plastic cards make the switch to digital – but I would challenge that and in particular in many markets where giving something physical is a key part of the gifting experience and process. Whilst I would totally agree that there is a large market for virtual gift giving, will it ever overtake physical is another question.
Likewise whilst we are always being told everyone will soon be paying everything by mobile but if we look at the latest predictions from Worldpay in their Global Trends 2016 report I note that Credit/Debit/Prepaid cards which account for 45% of all transactions in 2015 will still account for 42% by 2020. Although some of these may be through a mobile device but ewallets are forecast to drop from 31% to 30%, as the report notes physical cards have been given a new lease of life to some extent by the strong NFC roll out in many markets. People feel safe with a card, they find tapping convenient and their battery is not likely to go flat!
So whilst the world is going digital in many respects, I will contend that we should not forget that consumers like real things, they like to be able to touch and feel things. They like the ability to physically hold something it makes them feel sometimes more secure and other times gives them strong emotions – and this is not just the baby boomers but the same applies to millennials and other younger generations. After all people do not necessarily trust what they cannot see, at least with a card you have something to see; after all it is money we are talking about here not just notional images. And whilst it may be cool to pay with a fingerprint, or tap with a phone, if I am an Amex Black card holder there is a certain something that says I want to pay with something where people can see what I am paying with – that is called Kudos!
As a payments person it gives me a strong belief that the 5gms of plastic I have owned for a long time is likely to stay part of consumer engagement and use for quite some time.