Philip McHugh, Executive Director & Chief Executive Officer, Paysafe Group
How Covid-19 accelerated trends in digital payments
When we think about the rollercoaster journey we’ve all been on over the past year, it is difficult to point to a single area of our lives that hasn’t been dramatically impacted by the Covid-19 pandemic. The way we work, our family life, education, leisure and entertainment have all been severely affected by the virus.
It’s also been well documented already that the way we’re interacting and transacting with businesses has evolved, and we’ve seen an undeniable spike in e-commerce activity as many people shy away from buying products or services in person. In the world of commerce, this has been both a challenge and an opportunity: we’re not just seeing consumers spending more online, they are also transacting in a different way and using new payment methods.
Why Covid-19 is making people pay differently
During the height of the first wave of social distancing measures last spring, we undertook consumer research across seven countries about the digital payment methods shoppers were using, and 56 per cent said that they had trialled at least one new payment method online since the outbreak, be that a digital wallet or an online cash solution.
This was backed up by the 1,100 businesses who we later surveyed in autumn in a follow-up piece of research. They told us in detail how Covid-19 had affected them and 76 per cent said that they had actively noticed a change in the transaction methods that were being used in their online checkout. The majority also agreed that many of the consumer payment trends they were seeing before Covid-19, and the shift to online, had rapidly accelerated during the pandemic.
The online or omnichannel merchants we surveyed had several explanations for this. Unsurprisingly, many felt their customer base now included consumers who were completely new to e-commerce and had headed online due to the enforcement of social distancing measures or safety concerns about visiting stores. One critical reason why this group hadn’t been making online payments before was because they felt uncomfortable sharing their financial data, such as debit and credit card details, online. Others do not appear to have previously shopped online before because they simply didn’t have a credit or debit card. For both of these consumer groups, alternative payment methods that do not rely on sharing bank card information is their connecting point to e-commerce.
Another factor accelerating e-commerce uptake has come from consumers who are not new to it, but have grown the list of online retailers they shop with. Again, this is not surprising given the climate but it’s important to consider some of the behavioural impacts: these consumers are now buying from retailers they didn’t have a pre-existing relationship with, and consequently feel much less comfortable sharing their financial details, again making alternative payment methods such as digital wallets and e-cash solutions more attractive.
All evidence points to these consumers staying online in the long term once the pandemic is over. So for businesses, being able to service them with a wider choice of payment methods at checkout will be critical to long-term success as well as short-term survival.
An acceleration of existing trends
As mentioned earlier, while it is clear that the pandemic has significantly impacted consumer payment habits and how they shop, the trends coming to the fore are not unexpected. People often talk about how Covid-19 has triggered a global reset, but this is unlikely to be the case when it comes to digital commerce and payments. The shift towards greater adoption of e-commerce was happening well before the pandemic, but the trends we were already seeing have dramatically accelerated. The fragmentation of the online payments landscape as alternative payment methods grew in popularity developed and become a reality far more rapidly than perhaps it would have done. And the same is true in-store, where penetration of contactless payment methods had already gained some traction, but the adoption rate has leapt forward by light years on the back of Covid-19.
Businesses can’t afford to ignore these trends. For some time now, having an omnichannel digital and in-store strategy has been an important component of a growth strategy – today, it is critical for survival. Managing data and fraud risk efficiently and effectively has also been an increasingly important matter for business over the past few years, but tackling it is now more important than ever as online transaction volumes multiply.
Another trend we’re seeing outside of retail is the international remittance or money transfer market. Pre-Covid, as much as 70 per cent of the global remittance market was cash-based, but the shift towards greater adoption of digital remittance methods was already having an influence. And while the economic impact of the pandemic may have a supressing effect on the overall value of the international remittance market in the short term, undoubtedly the shift to digital remittances methods will accelerate.
Businesses are more prepared in the second wave
Despite a hopeful return to “normality” on the horizon thanks to the roll out of vaccines, it seems clear that there are going to be many more months ahead of managing through the virus. What was clear during the initial outbreak is that businesses were at different stages of readiness to manage the acceleration of the digital payment trends we have seen, and those that were not suffered as a result.
But many of these businesses have rapidly learned how to make their payments strategy a competitive differentiator and have been adept at adjusting their check-outs accordingly. By doing so they are not only better-positioned to ride out any future storm during the final phase of the pandemic, but also better set up for success in the new age of e-commerce once Covid-19 is no longer an issue. For businesses that have been slower to adapt, embracing a diverged payments ecosystem is now imperative. The good news is, it can also be a quick and easy move to make.