Covid 19 and social distancing restrictions compelled people to switch to online modes for many things and digital payments were one of them. As they say ‘necessity is the mother of invention.’ At the start of the pandemic, making payments online was a necessity but eventually, it has become one of the biggest conveniences.
As people switched to digital payments, financial institutes started getting inquiries about online payment processing.
And so, to assess the impact of Covid 19 on digital payments and prepare for situations, banks expanded their access to digital points. However, with the kick start of digital payment modes, security needed to be ensured around the clock.
To ensure seamless payment service, the banks had to scale up the digitalization process, upgrade the overall infrastructure to support digital payments, step-up cyber security and financial crime controls, open the data access and leverage the analytics to design customized offerings.
And so, in this post, I analyzed the impact of Covid and how the outbreak affected digital payments.
1. Payment providers are finding new ways for economic recovery
Covid has reduced the sales volume and payment revenues worldwide. Besides, maintaining normality will improve customer relationships while helping the economy.
However, payment providers can adhere to some measures that include –
- slashed interest rates
- reduced or waived off credit card interest
- reduced cash fee access
- reduced or waived off digital payments fees
Payment providers are preserving other ways to maintain liquidity and finding new economic recovery ways.
Covid digital payments have transformed the whole payment system. Additionally, most businesses are deferring payment obligations to support liquidity.
2. Cash withdrawals usage has declined
As a Covid after-effect, only a tiny percentage of in-person payments is being made. In addition, customers are being suggested to avoid cash for hygiene reasons. More so, cashless transactions are much safer than in-person payments.
Contactless cards and digital payments have become natural successors for payments. As a result, payment processing companies are quite in demand. Additionally, most banks are scrambling to equip customers who need a change from payments.
In the coming time, Covid will affect the usage and cash withdrawals as more people choose digital payments. Global payment solutions have played an integral role in cash flow too.
3. Payment companies are thinking about short-term priorities
Covid 19 has no doubt affected business profitability across all sectors. Almost all the industries have displaced workflows and have cut down on the costs due to Covid. Also, for payment companies, compressed revenues mark reduced consumption.
As a result, they are reviewing their offset costs to minimize the loss. Most payment companies now focus on short-term priorities, not long-term gains.
The crisis is going to have a significant impact on the way companies develop new strategies and innovate. For example, there are chances that a financial crisis will make way for new payment terms.
4. Tokenized payments are taking over
Digital wallets and new payment processing companies offer an enhanced digital experience for peer-to-peer and point of sales by removing the need to enter the details.
Thanks to the two-factor authentication, the whole process has become secure. Plus, in POS, the system requires less customer interaction and various touch points.
Also, there is no need to touch the card with a merchant reader. Additionally, improving identity through digital wallets will improve use cases in remote working environments and reduce fraud. These tools will be in great demand as more control over the payments is required.
5. Embed payment experiences are becoming popular
Due to Covid, the payment expenses are embedded in the customer journeys. So, for instance, a brand like Starbucks offers its customers a share of a mature payment experience that is flexible.
It extends to using technologies like the Internet of Things and Brain-computer interfaces. Besides, the above capabilities help reduce friction in identifying and purchasing essentials.
The effect of this experience is already evident in the food delivery market as both food and non-food online sales are increasing. The impact can help to channelize long-term strategies that will embed the payments. Additionally, Fintech will be able to deliver innovative solutions.
6. Conditions are favorable for frauds
Increased uncertainties can create conditions that are more favorable for fraud. When there is increased demand, actively mitigating the exposure is an extreme challenge for the people.
However, communicating proactively with customers, especially the vulnerable ones, can prevent short-term losses. As a result, long-term investment in fraud detection and other solutions will increase over time.
Due to Covid, the confidence levels are low, and anxiety is high, making the condition favorable for frauds. Therefore, regulatory bodies and financial institutes must focus on contactless payments and educate consumers about cash alternatives. However, this may impact the buyer’s buying behavior.
7. Consumers and companies will have more control
The request-to-pay feature will enable consumers and businesses to request money from each other individually. And this will wave off direct debits as individuals focus more on explicit requests.
All card companies and payment providers will have to develop new strategies to reduce the potential loss of revenue. Likewise, financial tools will provide more significant insights into spending patterns and access to essential services.
Also, banks will need real-time banking transaction dashboards to minimize costs and control cash flow. With Covid, the adoption of payment experiences focuses more on control.
Payment providers should actively mitigate risks and focus more on customers’ needs. Besides, protecting customers through proactive solutions to counter fraud is another task to be accomplished. They should think of short-term priorities and should work through operational details.