Pandemic sees ’10-year’ jump in new payment methods
Mobile and other “alternative” payment methods have seen explosive growth since the start of the pandemic – with many in the industry expecting that trend to continue after the immediate crisis subsides.
“We’ve seen two major things: one is the massive acceleration of adoption of both online payments and mobile payments in all of our markets”, says Mario Shiliashki, CEO of payments at PayU. “The second is a rise in e-commerce volumes – not just from the traditional e-commerce merchants, but many new merchants coming into the fold of e-commerce, especially SMEs. Some of them have had online presence before but generally only as a website without e-commerce capability”.
Since the start of the pandemic, PayU has reported a seven-fold increase in the number of registrations/on-boarding for small e-shops.
In Sweden, for instance, the number of merchants who accepted the country’s mobile payment system increased by 50 percent year on year. Merchants also reported a 38 percent increase in the number of payments.
Within the consumer payment space, the pandemic has greatly accelerated this existing migration trend to alternate payments, with yearly adoption rates squeezed into weeks.
“Typically in the share of digital payments, whether it’s browser or app based, we were seeing increases of market share versus point of sale of about a percent to a percent and a half a year” says, Philip Bruno, partner at McKinsey.
“What we’ve seen in the first four months after coronavirus is an 11-point share gain of digital commerce. Some of that comes from the denominator shrinking, but we do believe a lot of that will be persistent.”
A recent survey conducted by McKinsey found that across the board in all product categories, consumers in the US and UK were more likely and open to using digital payments to make purchases.
“Coronavirus has really pushed us 10 years ahead in terms of digital channel adoption”, says Albion Murati, partner at McKinsey.
While mobile and other alternative payment methods have proven to be key for operating amid lockdown and social distancing, the transition is not without its challenges.
Julian Sawyer, managing director of Gemini and co-founder of Starling Bank says hurdles that hindered the transition pre-coronavirus still exist and need to be addressed before more SMEs can be comfortable accepting mobile and alternate payments in larger volumes.
“Pricing is still not that great for the smaller retailers along with the frequency of the remittance processing in paying the retailer.”
He adds that many smaller merchants have had to deal with these issues because the scenario of not adapting could have meant the shuttering of their business.
Banks, fintechs and other alternative payment providers have been making strides to address this situation says Bruno.
“Within the US, some merchants, are actually getting same
day credit for their electronic transactions, particularly merchants that are not in high risk categories. That ‘wait’ which was traditionally two to five days is now down to zero in some instances. Globally, in countries that have a lot of account to account (A2A) transfers, cash is available almost immediately.”