The 2020 pandemic has shaken up every industry- the payments industry included. It also changed customer behaviour drastically, and forced companies to respond. Convenience, for instance, became a key factor for customer satisfaction across any sector. In this article, we discuss how Covid-19 has changed the payments industry, and what companies can do to adapt to these changes.
The most immediate change caused by the pandemic was the reduction in spending. Naturally, lockdowns didn’t permit consumers to buy in-store, and consumers became increasingly more self-aware of their spending. Whilst payments were already slowing moving to online before the pandemic, 2020 has seen a steep rise in online payments across all industries. And the tech-savvy younger generations weren’t the only ones making purchases online: older generations followed this movement too. The overall ecommerce sector boomed greatly, six times more than the annualised growth rate of 2019 (McKinsey report). The pandemic has also popularised debit cards, which were generally used for smaller purchases.
Contactless payments grew by 12% in 2020, with six out of ten people using this payment method in the UK. This accounted for 27% of all UK payments (UK Finance report). Following this rise, the spending limit for contactless payments was adjusted from £30 to £45 in April 2020. More recently, in October 2021, the spending limit increased to £100. Contactless payments provide customers the convenience and speed they want when making purchases. The pandemic accelerated their usage as consumers were encouraged to reduce contact with any surfaces. 88% of debit cards and 81% of credit cards are now contactless.
Another payment type that has seen increasing adoption is cross-border payments. National lockdowns have put individuals and businesses on hold. Working from home is now a widely popular approach, and it has enabled people to live anywhere. With employees and customers spread across the globe, cross-border payments became highly popular. PayPal, a widely known digital wallet, reported double-digits growth on cross-border transactions in the second half of 2020 (McKinsey report). The pressure is on for businesses to deliver cross-border payments as fast and seamlessly as any other payment type.
The growth of digital payments prompted a surge in online fraud. Fraud risks include data theft, but also scams that target mainly those who are new to electronic payments. In fact, in the first four months of 2020, there were more than 900.000 scam messages related to coronavirus (Interpol report). Payment regulations are constantly being updated to keep up with the increasing fraud risks, and it has now been more important than ever to invest in the best security tools to keep customers safe. Businesses must now also implement SCA (Strong Customer Authentication) measures as part of PSD2 regulations.
The year of 2020 has shown that customer demand can shift quickly, so it is important to adjust to customer needs just as fast. Having the ability to adapt to changes is now the most determining factor of success. Whilst some companies have access to state-of-the-art technology and are therefore more flexible in enhancing products or developing new services, other companies are on a totally different boat. The insurance sector, for instance, is a traditional industry with decades-old infrastructure that has never changed. These incompatibilities between new technology and old systems hinder their ability to innovate.
Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.
In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.
Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.