We’re seeing a step change in how people pay. Social distancing is keeping us away from our loved ones, but by necessity, we are becoming more digitally connected than ever before – including when it comes to paying. This evolution is likely to continue post-coronavirus, as even slow adopters realise the benefits of moving to digital payments.
Coronavirus has sped up a change Mastercard has worked towards for more than 15 years – fast, seamless, and secure checkouts for consumers and merchants and resilience for businesses. We’ve worked with industry partners across sectors to empower smarter and safer payments for customers.
People were already asking for speed and convenience for everyday purchases. Contactless has been on the rise worldwide for this exact reason. However, the desire for touch-free commerce is increasing demand for other methods of payments. Click and collect is in vogue as a way of keeping contact to a minimum, alongside e-invoicing, in-app payments, and pay by link replacing cash. The has made them ideal for coping with a pandemic – and people aren’t looking back, according to the Mastercard research:
almost 7 in 10 consumers say the shift to digital payments will likely be permanent, and nearly half plan to use cash less – even post-pandemic;
46% of respondents in Asia–Pacific say they are using cash less, while two-thirds of Latin American respondents say they are using cash less or not at all;
64% of European respondents say tap and pay is now their preferred way to pay in-store.
Besides face-to-face contactless payments, touch-free transactions have skyrocketed as people are pushed towards new channels. In the US, ecommerce spending grew 93% year-on-year in May 2020, and in the UK, ecommerce reached 33% of total retail sales in April/May 2020.
Small businesses push to digital
It’s no surprise that small businesses have been hit the most by COVID-19. Around 50% of US companies think they’ll see a significant decrease in revenue in 2020, compared to 21% of digital small business owners. People are embracing touch-free to weather this crisis, with SMEs adopting two methods to help keep business growing.
E-invoicing
As physical sales drop and invoices remain unpaid for longer, many small businesses are turning to e-invoicing. As well as supporting their move to digital and speeding up invoice turnarounds, it helps prevent posted invoices sitting in abandoned buildings due to working from home. This doesn’t mean a 100% e-invoicing approach is ideal for everyone, but it highlights the importance of an agile approach that allows smaller business owners to continue operating while discovering the extra benefits of digital.
In January 2020, a report by the digital banking firm Tide showed the average UK SME owner spends 1.5 hours per day chasing late payments and is owed GBP 8,500 (about USD 11,000) – over GBP 50 billion (USD 65.5 billion) across all SMEs and 900,000 hours per day. While e-invoicing wouldn’t eradicate this completely, it can simplify tracking and settlement.
Recurring payments
The surge in online transactions and flood of new and returning customers has made recurring payments an important issue. Three out of four US consumers have tested a new shopping behaviour during the COVID-19 crisis – 40% a new shopping method, 37% a different brand, and 33% a different retailer. Loyalty is being disrupted with more than 50% of US consumers citing convenience and value as drivers for switching where they shop.
The increase in first-time buyers and those trying out new channels is a chance for business owners to expand their share of digital sales. However, it’s also a threat to those with an established presence and lacking digital checkout experience. Online shoppers looking for repeat purchases will be frustrated by inconveniences such as re-entering payment details or resubmitting the same order every week.
Physical store owners moving to digital should appreciate the importance of recurring payments. Ensuring that the first-time buying experience is smooth and promising an even smoother experience next time is key to making a return visit so much more appealing – an important lesson even some digitally native SMEs could learn.
Larger businesses, big changes
Change isn’t limited to small business owners. From as simple a solution as going cashless to as advanced as disinfectant misters and thermal scanners, some changes are here to stay.
We’re seeing a big shift in the US towards touch-free payments, which is particularly notable due to how the country has lagged behind others on the adoption of new payment methods – only 3% of US cards were contactless-enabled in 2018, compared to 64% and 96% in the UK and South Korea, respectively. Click and collect saw a record 130% year-on-year growth in June 2020, as shoppers tried to keep contact to a minimum, with physical sales dropping 21% when compared to May 2020.
Business owners who are lucky enough to already have a robust touch-free system in place are seeing an increase in revenue. In-app payments and online banking surged in April 2020, with a 22% increase for in-app payments, and downloads of banking apps up 60%. Nearly three quarters (73%) of app verticals in the US reported boosted revenue, beating the still-impressive 65% worldwide figure.
Looking forward, reinventing the world
COVID-19 is unsurprisingly dominating the news, but consumers are still looking towards a brighter future, with a third wanting to see more topics that have nothing to do with coronavirus.
Though it may be difficult to imagine where the road ahead will lead us, there is a clear desire to change things for the better – both personally and globally. As the digital payments and touch-free transaction landscape continues to evolve, it’s clear that they are becoming an ever-more important part of the future we’re building together.
This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.
About Keith Douglas
Keith Douglas is Executive Vice President at Mastercard Payment Gateway Services. As the leader of Mastercard’s Gateway business, Keith has responsibility for the end to end merchant gateway business in over 100 countries. Keith brings over 25 years of financial industry experience across strategy, marketing, sales, delivery, customer and product management disciplines.
About Mastercard Payment Gateway Services
Mastercard Payment Gateway Services offers industry-leading global payment processing technology for merchants, partners, and acquirers. Our white-label capability enables acquirers and technology partners to rebrand/resell our payment gateway. Facilitating a variety of payment methods across multiple channels internationally, our solution enables customers to meet their business objectives.
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