Payment Trends and COVID-19: Adjusting to Gain Lost Revenue
Consumer behavior has changed due to the COVID-19 pandemic. Nearly 50% of global shoppers are using digital payments more than before the pandemic, and the majority plan to continue after the virus is contained. In the report, Global Online Payment Methods 2020 and COVID-19’s Impact, close to 75% of the respondents found that contactless payments were a cleaner way to pay.
COVID-19 has significantly sped up digital payments’ transformation in the past few months more than in the last five years. Shifting to online commerce, contactless transactions, digital wallets, and even fraud attacks have all made significant moves. Some of these shifts may be short-term, while others will become permanent behavior changes.
Dramatic changes have occurred in consumer and business spending. Due to shelter in place, forced closures of some business types, and increased unemployment and other financial distress, we see some similar patterns to other times of economic downturns. Debit cards are preferred over credit cards because consumers are putting more value on everyday needs over discretionary income purchases. Adopting online grocery orders, restaurant take-out, medical supplies and prescriptions, and other necessary goods has dramatically increased in all demographic markets.
Consumers are also demanding contactless in-store payment methods. Visa and Mastercard have raised transaction limits for contactless payments. Apple Pay, Google Pay, and other wallet apps are likely to become more popular as well. And the use of cash is decreasing to reduce less in-person purchases. Globally, the U.S is behind in adoption compared to other countries. In part, because unlike other regions of the world, the U.S. credit card industry is fairly mature and therefore has a lot of legacy technology already in place.
Fraud, unfortunately, is also increasing in e-commerce and online banking. Security firms are recording huge amounts of fraud in phishing attacks since the beginning of March. Transaction fraud is rising as businesses have seen rapid shifts in online transaction volume. Many companies don’t have the defenses in place to identify fraudulent transactions. Some sneakily disguised attacks seem like legitimate information from the WHO and NHS that offer COVID-19 tips, selling facemasks and other protection, or asking for charitable donations. With this pandemic, many merchants are worried about the upcoming holiday season and need their business to dramatically increase to make up for the lost sales. In a Kount survey, 96% of digital merchants say that the upcoming holiday season is more important to their business to catch up on sales to recover.
Merchants see a high volume of canceled transactions from events, plane tickets, hotel accommodations, car rentals, and other travel-related activities. This virtual stop in travel has nearly shut down the travel industry with estimations of a 60% – 80% decrease. Some global locations are closed to tourists, and others are bocking tourists from certain countries, territories, regions, and cities.
So, now, what do you do? First, rethink your strategy. With physical locations closed or limited, look into digital platforms to maintain a competitive advantage. The line between commerce and payments is blurry, so look to a solution that allows you to grow and offer your customers the payment methods they prefer. Second, upgrade or replace your fraud detection methods. Use advanced technology to prevent fraud before it happens by reducing the impact of bad players looking to profit from old systems. Third, explore your options. While some merchants may experience bank scrutiny, FinTechs can meet merchant needs and find new pockets of customers using the right offers with the right banks and suitable gateways. At the least, evaluate how these experiences will shift customer behavior and preference and determine what strategies you should revise to maintain relevance in this changing world.
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