The global pandemic has changed the way people manage their finances. This has given rise to a wave of rapid product innovation from financial service providers. Many of the trends will be fundamental and long-lasting.
The payments space has been hit hard by the pandemic, with investments and remittance volumes significantly lower as businesses and consumers have reduced their outgoings and cut back on non-essential purchases.
There have also been positive outcomes. Government restrictions on the movement of people and business operations have led to more consumers and businesses adopting digital banking products. At the same time, service providers have rapidly brought to market innovative products that meet new customer demands and help to combat the impact of coronavirus.
However, governments and payment service providers soon identified the potential risk of spreading the virus through using keypads on card machines. The response was to encourage consumers to use contactless cards and mobile devices wherever possible. Many countries quickly raised contactless payment spending limits; some, like Germany and Sweden, even doubled their limits.
“Banking has changed irrevocably as a result of the pandemic. The pivot to digital has been supercharged,” says Jane Fraser, president of Citigroup. (Source: Forbes)
Consumers have embraced digital and mobile banking options, and it seems inevitable that many of them will continue to use these services rather than revert back to in-person banking. The older demographic in particular has been pushed into adopting digital services for the first time, including making more online purchases.
Even before the pandemic, banks had been assessing their high street presence. They will now have to reassess the value of their brick-and-mortar operations. A further decrease in the number of physical bank branches would benefit challenger banks and mobile-only banks. This could lead to an influx of new players and encourage innovation in digital banking app services.
As consumers have been urged to stay at home, the popularity of mobile remittance apps and online remittance platforms has increased. They have become the safe and convenient way to transfer money.
Even before the pandemic, the popularity of mobile remittance was surging. Providers, such as World Remit, Western Union and Azimo had begun to spend heavily on advertising, with the former two companies partnering with Premier League football clubs. Traditional money remittance providers, including MoneyGram and Western Union, recently released new mobile applications, while PayPal has been strongly promoting its money transfer app, Xoom. This migration to mobile and online money remittance will continue as part of the new normal.
Fintech companies have been working hard to bring new products and services to market that meet the needs of consumers during and after this pandemic. Here are a few interesting examples:
More than 45% of consumers say they have permanently changed how they interact with their bank. (Source: The Financial Brand)
Here are some payments trends that are set to remain:
What has been a necessity during the lockdown will soon become a preference and a convenience. Managing finances from the comfort of your home and the convenience of ordering everyday goods online and via mobile devices will be too appetising to revert to more traditional processes.
The future of cash payments will be reviewed in many parts of the world. Scandinavian countries have led the way in the use of quick-pay solutions and cashless payments, with cash exchanges a rarity – and the use of cash in many other places looks likely to decrease. Cashless event venues, for example, signify the way forward.
Finally, the increased reliance on digital banking services will inevitably mean heightened expectations for instant payments and seamless customer experiences. To stay competitive, organisations will need to find ways to increase automation, reduce friction, and accelerate their payment operations.