There’s a good chance that we won’t completely grasp all the ways in which Covid-19 has transformed businesses and lives until we’re looking at it in the rearview mirror. But one change that is very obvious today is that while consumers self-isolate at home, they have started buying everything they need online.
According to data collected, contactless payments were on the rise in most parts of the world thanks to initiatives to facilitate this growth (eg: the Single European Payments Area (SEPA) and Payment Services Directive in Europe). This growth has exploded during the pandemic, especially in low-value purchases. According to data given by Mastercard, almost 75% of all transactions are contactless in Europe today. Mobile payments are also increasing, with 56% of retailers in the US accepting e-wallets as a method of payment as compared to 44% pre-Covid.
In 2019, reports predicted a growth of 6% in the global payments industry. But due to the pandemic, this has changed drastically and is now expected to fall by 8-10%. This amounts to between $165 to $210 billion. Predicting the instability ahead, the share prices of payment companies have sharply declined too.
With this global mass-scale impact, Covid-19 has forever transformed the payments industry and has irrevocably accelerated the shift to digital payment platforms. Let’s look at some of the different areas that have been impacted to facilitate this shift.
Cross-border C2B transactions have declined
Different reports have shown data proving that 25% of the decline in consumer-to-business transactions can be chalked up to cross-border payments. One major reason for this is the damage the pandemic has done to the tourism, hospitality and travel industries. Growing demand for localising commercial ecosystems and campaigns to consume local products has aided this fall. Entertainment hubs, expat markets and travel destinations are among the worst-hit places in the world. This includes markets like Thailand, Saudi Arabia and the UAE. With lockdowns easing up country by country, it is to be seen whether physical transactions pick up the pace again.
Global B2B transactions have taken a hit
In Jan 2020, data showed that dealings with freight containers had been negatively impacted in comparison to the same time a year ago. Global markets are also expecting a large-scale disruption of supply chains around the world. Since different countries will heal and recover at different rates, all the markets won’t open back up together.
There are higher securities transactions than ever before
A dramatic increase in securities transactions indicates market instability. The securities market today is highly volatile which has led to an increased degree of risk in international transactions.
Retail services and payment merchants are severely hit
POS (point of sale) gateway transactions have declined in volume by 30-40% through 2020. However, online payments have not been hit that badly. According to retail analytics’ firms, footfall within stores in the UK declined by 20%, while the US and Italy saw a fall of 70% in March 2020, compared to data of footfall in March 2019. Culture, travel, restaurants, hospitals and hotels are all industries that have been struck hard to the point of collapse. In 2018, these industries comprised 30% of spendings within families in the EU, with POS transactions making a much higher percentage than it is today.
There is enough and more evidence that digital payments have become a rapidly rising trend. This shift to digital payment platforms is unlikely to be affected by markets opening up or any other changes in the global economy. The upper limit for contactless payments is set to remain in place as we head towards a cashless society with no sign of slowing down.
