US digital payments: Achieving the next phase of consumer engagement

For the past six years McKinsey’s annual Digital Payments Consumer Survey has documented the steady adoption of mobile payments and digital wallets by US consumers, with 2019 results signaling a potential inflection point. Our 2020 update inevitably reflects the significant impact of COVID-19. The results confirm deeper digital engagement while shedding new light on barriers to the “last mile” of consumer adoption. Key takeaways include:

  • COVID-19 has reinforced the trend of digital adoption in payments and retail commerce, across payment types and demographics
  • The digital growth picture is not entirely rosy, however—consumer trust has eroded slightly and although consumers are turning to digital payments in increasing numbers, it is not clear whether all recent behavior shifts will prove to be permanent
  • Despite growing awareness and adoption, nearly half of consumers either have not heard of contactless payments or remain uninterested in them due to perceptions of value, security, and availability, posing a continuing challenge for merchants and card issuers in effectively communicating the value and enabling ubiquity of digital solutions.

More than three-quarters of Americans use some form of digital payment, which we define as any of the following: browser-based and in-app online purchases, in-store checkout using a mobile phone and/or QR code, and person-to-person payments. Although penetration of digital payments reached 78 percent in 2020, recent growth has been incremental, implying that some systemic barrier must be overcome to reach the remaining group.

Significant gains have been recorded, however, in the share of consumers using two or more digital payments methods, which jumped from 45 percent last year to 58 percent in 2020 (Exhibit 1). This indicates a deeper level of digital engagement, which can presumably be tied in part to pandemic-related behavior. The two most common forms of digital payments (in-app and online, used by 57 and 53 percent of consumers, respectively) lend themselves to remote shopping models and were also the fastest growing, accounting for nearly all the gains over 2019.


In a similar vein, more than half of US consumers reported shifting purchases online from brick-and-mortar stores since the onset of COVID-19 (Exhibit 2). Just as importantly, more than one-third expect to further increase their share of online shopping in the coming six months, versus 11 percent who plan to revert to brick-and-mortar channels. This is a strong indicator that many new shopping and payments behaviors prompted by COVID-19 are likely to persist for the long term.


The perception that younger demographics are more inclined to embrace digital payments channels is borne out by the data—but only to an extent. Adoption among 18 to 34 year-olds has grown to 93 percent, with the share of non-users falling by half since 2018. On the other end of the spectrum, 38 percent of over-55 consumers are digital holdouts, a ratio that has remained stubbornly consistent. Digital users in both the 35-54 and over-55 groupings, however, showed the greatest uptake in a second digital payment method during 2020.

Though not yet severe, one potential area of concern is a slightly eroding level of consumer trust in digital payments. More consumers reported a deteriorating perception of digital payments security over the past year (15 percent) than an improving one (11 percent). Major “next generation” payments players like Amazon and PayPal continue to be awarded consumer trust on a par with banks and traditional network providers. An analysis of the data, however, reveals growing concern with payments made via social apps and “Internet of Things” devices.

The one category for which consumer comfort has materially improved is contactless debit and credit cards. Although a contactless card transaction is not fully digitized,[1] it represents an area where health concerns stemming from COVID-19 could boost a technology that has struggled to find a US foothold. Awareness of these cards has grown markedly since 2019, with the share of consumers reporting possession of such an enabled card more than doubling (Exhibit 3).


Significant hurdles to widespread adoption must still be overcome, however. The 21 percent of consumers who report having a contactless card is less than half the share indicated by issuers’ distribution data—which implies that a meaningful number of people are unaware they are already contactless-enabled. More troubling, nearly a third of consumers familiar with contactless technology remain uninterested in it, citing a lack of incremental value and security concerns. Given that most experts consider contactless payments to be as safe as or safer than swiped or inserted EMV equivalents, more aggressive communications campaigns appear to be in order.

Point-of-sale lending remains a high-profile opportunity reshaping the retail experience. Although our survey did not detect a material uptick in the share of consumers using (27 percent) or interested in using (8 percent) such “buy-now-pay-later” digital financing in 2020, additional volume from the established base has delivered 26 percent average annual revenue growth over the past five years, with 18 percent growth projected through 2024—by which point POS financing is forecast to generate $57 billion of annual US revenue.[2]

Both retailers and card issuers can take action to optimize their positions given these findings. While the ongoing trend toward online and in-app shopping should surprise no one, retailers cannot afford to shortchange the brick-and-mortar channel that still constitutes the majority of sales for the vast majority of businesses. With consumers signaling their intent to carry out an increasing share of purchases with contactless cards or digital wallets (Exhibit 4), retailers should also ensure these channels are enabled and capable of delivering a seamless experience.


With many customers opting for fewer trips to the store, the inability to complete a sale in the customer’s desired mode carries added risk. Optional customer experiences to minimize in-store interaction at the consumer’s discretion (e.g., curbside pickup, leveraging QR codes and/or NFC to reduce checkout queues or eliminate the counter checkout process entirely) may also prove beneficial.

For card issuers, the available levers are more limited and center on rethinking top-of-wallet propositions. Shifts in spending patterns prompted by COVID-19 have reduced the appeal of travel rewards long relied upon by large issuers. This creates a window of opportunity for others to claim market share, particularly through campaigns focused on the growing use of digital wallets and in-app purchases. Issuers should also proactively address security concerns around contactless cards, build communication programs ensuring awareness among those in possession of such cards, and enhance messaging to improve their value perception. “Top-of-wallet” status remains the primaryobjective—regardless of the nature of that wallet.

About McKinsey’s Digital Payments Consumer Survey

Since 2015, McKinsey has on an annual basis measured consumers’ self-reported usage of and attitudes toward a variety of digital payments instruments. This year’s survey is based on input from nearly 2,000 US consumers gathered during August 2020.

The authors would like to acknowledge the contributions of Vaibhav Goel and Anvay Tewari to this article.

[1] In our survey, “tap and go” payments are not considered digital transactions.

[2] McKinsey US Payments Map.