Social distancing has become a new norm in today’s grim situation. The COVID-19 pandemic has affected all the markets and industry sectors along with daily life globally. However, in this digital world, the flow of money cannot stop by the coronavirus outbreak or lockdowns. As a result, the adoption of the digital payment solution is increasing at a rapid pace.
Even before the case of pneumonia of unknown reason was reported on December 31, 2019, digital payments were on the rise thanks to the growing number of smartphones. As per Statista estimate, total transactions through digital payments will reach US$4,769,370m in the year 2020 that shows a YoY increase of over 15%. It is fair to mention that spread of COVID-19 has acted as a catalyst in the growth of digital payment platforms.
Let’s understand how COVID-19 has accelerated the adoption of digital payment solutions worldwide.
Impact of Coronavirus Outbreak on Industry and Markets
Coronavirus has broken the supply chain while rupturing the demand and market trends. As a result, we witness a significant impact on the manufacturing sector and consumer behavior. On one hand, the lockdown has compelled companies either to implement the Work-from-Home concept or to shut down the operations. On the other hand, more than a third of the world’s population is forced to stay at home and therefore, their behaviors are started to change.
As the COVID-19 crisis does not seem to end in the short term, it can result in the exit of many startups and SMEs from the market. We have already embraced the recessionary economy while staying at home, and now, we need to get ready for bigger challenges in the industry sectors and markets. It is interesting to see how this condition will boost digital payments over the period.
Factors that Lead to Increase Adoption Rate of Digital Payment Solutions
Cash loses value
Governments and regulatory bodies have started discouraging the use of cash during the recent coronavirus outbreak. As per the study, cash or currency notes can act as a potential career of the virus. It has forced people to switch to digital payment options.
Also, the urgent need for essential products promotes digital payments as a swift and secure option. The steep rise of 160% and 218% in a number of downloads in online grocery delivery apps Walmart Grocery and Instacart during the outbreak indicates this truth.
Furthermore, many bank branches are either closed or work with minimum staff. Therefore, retailers and other vendors find it hard to deposit cash into their bank accounts. They tend to switch to digital payment options to eliminate the risk of theft.
As per an official survey, around 38% of customers find contactless payment as a basic feature of payments. They are ready to embrace digital wallets or m-Wallets in the age of smartphones. Another study has revealed that more than half of the payments in Germany are contactless as compared to 35% before the corona crisis. Similarly, cash use in the UK has also halved after the imposition of a nationwide lockdown. People avoid cash transactions.
Digital transactions are free from any contact or physical interaction. They also provide a more secure way to pay and receive money. These are key reasons why people prefer digital payment solutions to currency notes and coins.
Growth of E-Commerce and M-Commerce during Coronavirus Outbreak
People who are locked in their houses prefer online shopping. Even in a few countries where partial or no lockdown is imposed, people tend to avoid visiting brick-and-mortar stores. From groceries to household essentials, people prefer online shopping. Many retailers have also embraced eCommerce technology to capitalize on this changing trend. As consumers increase the stock of food and other essentials, eCommerce and M-Commerce routes remain handy.
The volume of online transaction surges as consumers switch to various eCommerce and mCommerce channels including on-demand grocery delivery apps. It is a ‘corona effect’ that the eCommerce transactions were up 23% in March. However, online travel purchases like hotel booking and flight booking along with the cross-border eCommerce payments are declined due to COVID-19.
Broader Outlook
During the lockdown period, the value per transaction is increasing because many people tend to buy necessary goods together. But, the total monetary value of online transactions is decreased because the overall purchasing power is decreased globally. In a short to medium term, the situation for digital payment seems to remain the same. However, in the long run, we can expect that value per transaction and total value of online transactions will increase through various digital payment channels.
Concluding Lines
The adoption rate of digital payment was slow until 2019. Also, there was a vast variation as per the sector and country. The COVID-19 pandemic has, however, increased the adoption of digital payment solutions significantly. Though various economies are still at different stages of development across the world, the outbreak has forced people to change their shopping habits in favor of eCommerce and M-Commerce. It has paved the way for digital payments.
We can hope that the coronavirus crisis will be eliminated soon, but the ever-growing number of smartphone users will drive the growth of digital payment in the future. Though more competitors will come up with digital payment platforms, customers will certainly get an improved experience. Be it a digital wallet or other contactless methods, the digital payment solutions are here to stay.