Deck the halls, but avoid the lines

Cash is out. Digital wallets are in.

Holiday shopping—and how to pay for it—looks a little different this year. Shoppers are spending more, spending sooner, and leaning into digital payment methods, motivated partially by continued supply chain woes and changing retail habits.

According to recent data from the National Retail Federation, holiday spending has the potential to shatter previous records. Holiday sales in November and December are expected to grow between 8.5% and 10.5% more than in 2020, to between $843.4 billion and $859 billion, the federation estimates.

The surge in holiday spending is expected to compound existing supply issues and spur digital payment trends.

Since the pandemic began, 59% of consumers surveyed have started or increased their use of digital wallets, and 43% have started using, or increased their use of, digital gift cards. In 2019, as many as 63% of surveyed businesses accepted Apple Pay, one of the most common digital payment options. Another 26% said they planned on launching Apple Pay within the next two years.

"When people talk about digital wallets, they're usually referring to a number of digital payment options, like P2P apps, no-touch payments and the like," said Leasa Melton, a senior consumer product manager at BOK Financial^®.

Given the lingering effects of COVID on travel and spending, some digital wallet options are also good gift-giving alternatives. A third of consumers (32%) surveyed plan to pay for their holiday gifts with gift cards, and more than a quarter (26%) plan to pay using P2P (peer-to-peer) apps.

Supply chain workaround

In nearly every industry, businesses are continuing to face supply chain disruptions that are predicted to slow down the gift buying, and selling, season.

Using P2P apps like Zelle, Venmo, and CashApp, shoppers can avoid the dreaded out-of-stock, backordered or delayed shipment woes by gifting funds—either open-ended or for a specific purpose—instead of tangible goods.

Labor shortage

Many businesses are experiencing longer wait times and shortened operating hours due to an ongoing national labor issue. That could mean longer holiday lines at crowded retail stores.

"Digital wallet options can make online shopping safer and faster," said Melton. "This can be a big help if you're trying to avoid in-store crowds."

Physical and digital safety

Still hesitant to shop in a physical store during the pandemic? "Using a digital wallet option in which shoppers tap their phone instead of inserting or swiping a card means you usually won't have to touch the merchant terminal, which is ideal for the germ-conscious consumer," she said.

Not all retailers accept mobile payment options, so look for the "tap" symbol on the merchant terminal. There's also added security, she said, especially when it comes to in-app purchases.

"When you load your card to a mobile wallet, your card details are encrypted," Melton said. "So when the transaction takes place, it's basically a unique digital number that gets assigned to your card in place of your physical card number."

That unique number is transmitted and shared with the merchant, not the card number. "This is great for people who are nervous about using their card online," she said.

"With the proper payment security measures in place, like two-factor authentication, shopping in person or online with digital wallets can be a safe alternative this holiday season," said Melton.