Paysafe study explores vibrant experience economy

A new study by Paysafe, published July 24, 2023, found the experience economy thriving despite a global cost-of-living crisis. The latest in the company's Lost in Transaction series, "Consumer payment trends 2023: How consumers' shifting priorities are impacting the experience economy," surveyed 14,000 consumers in Europe and the Americas and found 23 percent of U.S. consumers have not cut their budgets, and 41 percent are booking travel and airline reservations online.

Rob Gatto, chief revenue officer at Paysafe, has observed that experiential commerce is trending worldwide. "Experiences are paramount for consumers despite the cost-of-living crisis and travel is one area where people are willing to continue spending their hard-earned cash, or even increase how much they spend. This is a trend that we are seeing in the US as well as globally," he said in a statement.

Gatto further noted that younger consumers prioritize travel, with 33 percent of 18- to 24-year-olds spending more on flights compared to 6 percent of 45- to 54-year-olds who increased travel spend. In addition, researchers noted 23 percent of 18- to 24-year-olds spend more on travel packages, compared to 7 percent of the 45- to 54-year-old segment.

Rising cash, eCash usage

Paysafe researchers noted that in times of economic uncertainty, consumers frequently turn to cash spending as a budgetary tool that helps control spending.

"With eCash becoming more widely available, it stands to reason that consumers would take the opportunity to take this money-saving technique digital, using eCash to control online spending just as they use physical cash to control spending in bricks-and-mortar stores," researchers wrote. "Our research suggests this is exactly what's happening. While eCash usage has increased across the board, the spike has been greatest among respondents who have changed their payment habits as a result of the cost-of-living crisis, with 60% of them telling us they're using eCash more often."

Gatto concurred, pointing out that eCash enables cash to be used for online transactions and provides access to the digital world to cash payers and security seekers. While Paysafe offers prepaid solution and post-paid eCash solutions, researchers posed the eCash question as a general query, he stated, to gauge adoption levels of cash and cash equivalents among U.S. consumers.

Post-pandemic lift-off

Gatto went on to say that researchers identified significant trends in consumer behavior, most notably an increasing preference for prioritizing experiences over material purchases. "This shift in consumer mindset is evident throughout the U.S., as people are reluctant to compromise on their travel-related expenditures," he said. "This could be due to a number of factors, and perhaps connected to the impact of the pandemic, which ultimately accelerated the emergence of the experience economy and prompted many brands to engage with consumers in new ways to cater to their evolving preferences."

Additionally, he noted, the Paysafe study reveals that consumers are embracing experiential spending while actively seeking other ways to save money, with 67 percent indicating a higher likelihood of making purchases during sales events such as Black Friday. "It's worth noting that the rising cost of living is affecting certain purchases, leading to nearly half of the respondents (47%) abandoning their online shopping carts due to budget constraints," he wrote, citing the following additional emerging consumer trends:

• Mobile wallet share: While debit cards and credit cards remain the two most popular payment methods, Gatto mentioned that mobile wallet and digital wallet usage have shot up. 52 percent of respondents are comfortable leaving home without a physical wallet, he explained, and rely on mobile wallets like Apple Pay or Google Pay for everyday purchases. 55 percent of respondents believe mobile wallets will completely replace cards within the next decade, he added, and 40 percent of respondents reported increased reliance on digital wallets for online payments compared to last year.

• AI-driven payments: AI-driven payments have immense untapped potential, Gatto noted, even though current adoption rates remain low. At present, just 14 percent of global consumers say they are using AI-driven payments technology, with the remaining 86 percent expressing reservations about the use of AI. While 10 percent of respondents expressed willingness to use AI-driven payments in the next two years, if they became more established, researchers found 17 percent are not comfortable using AI-driven payments technology at all.

"Lack of awareness and knowledge are the primary obstacles hindering the wider adoption of AI payments tech," Gatto stated. "A quarter (24%) cite a lack of knowledge about the safeguards that are in place to reassure them that data isn't being misused and over a third (35%) said they don't know enough about AI-driven payments technology to feel comfortable using it yet."

To encourage wider adoption, Gatto stressed the need to increase awareness and understanding of AI-driven payment technologies. Payment service providers and merchants will need to educate users about the benefits of AI-driven payments, he added, which include smoother, more convenient and secure transactions in order to break down those barriers. Leveraging consumer awareness of AI being used for risk-scoring, fraud detection and personalization by merchants can also help drive adoption, he noted.

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