Holiday shopping: Payments can help merchants meet consumer needs

2023 is coming to an end and the holiday season is fast approaching, so let’s take a look at changing consumer payment trends, and how this may impact festive spending.

Using our latest research, Lost in Transaction 2023: The Disposable Income Report, which surveys 14,525 consumers across the UK, Europe, and the Americas, we dive into how consumers are using their disposable income during this holiday shopping season, and how merchants can ensure a successful end to 2023.

Consumers will spend differently on holiday shopping

The festive season, for those who celebrate, is a time of expenditure – whether that’s gift giving, food consumption, or socialising. And this isn’t going to change in 2023.

Black Friday still saw huge numbers of online shoppers pouring through the digital doors to get a deal, with Americans setting a new online spending record in 2023. In fact, seasonal deals have a part to play in how consumers are carrying out their festive spending this holiday season.

When asked how consumers will change spending habits over the festive period, 21% planned to purchase in advance during times of seasonal deals, and 20% saved earlier to make up the difference. But behaviour is changing in other ways, too.

33% of consumers say cutting down on gifts was the first choice for how they would change festive spending habits, with 30% stating they will have less to spend. This is more broadly reflected in other choices – 22% will spend less on food an alcohol, while 19% will do less socialising/entertaining during this period.

And so, while some consumers have less to spend this year, it’s essential for merchants to cater to their changing needs and make the holiday shopping experience as seamless as possible.

Payments can be the difference for merchants this festive season

It’s not only consumer spending habits that are changing – the way they pay is, too.

While traditional methods like debit cards (67%) and credit cards (50%) are used most often by consumers during the festive period, many are looking to embrace a broader variety of payment options. Alternative payment methods (APM) like digital wallets, for example, are growing in prevalence – 48% of consumers are using them more often when spending online over the festive period.

25% are doing the same with eCash, which reflects a trend identified in our last Lost in Transaction report – 31% of people who used cash online in the previous year are paying with it more often than they did 12 months ago.

For businesses concerned about changing festive spending habits, providing the payment types and seamless checkout experience consumers demand can help ensure a prosperous end-of-year.

Looking to the year ahead

After a turbulent year for the economy, it’s no surprise that many people may not know what to expect from 2024. But that’s not stopping consumers approaching the year with optimism – 49% feel confident the financial situation will improve.

This optimism is particularly strong in Latin America, with consumers in Peru (73%), Ecuador (70%) and Mexico (68%) looking ahead to 2024. Many in the US (50%), too, are seeing a bright financial future ahead.

Regardless of how next year pans out, many consumers are aiming to change purchasing behaviours, with one in two (50%) respondents saying they will spend their money differently in 2024 than in 2023. 47% agree they’ll be able to save more money next year, and 42% will prioritise spending on experiences over possessions in 2024 – a boon for the experience economy.

Small businesses should also see a boost – 42% of consumers will shop more locally in the year ahead. They’ll need to offer a robust, streamlined payment experience, however, with 37% of consumers looking to pay for more goods using alternative ways of paying in addition to credit and debit cards, in 2024.

And if the economic situation does improve, and consumers have more disposable income to spend? Many consumers (32%) will prioritise home improvements, with clothes next on the list (22%), and others (19%) opting for package holidays.

While the picture for 2024 may not be clear, for consumers and merchants across every industry, there is optimism for the year ahead.

Want to learn more about consumer payment trends? Check out Lost in Transaction: The Disposable Income Report.