The payment behavior of consumers shows fundamentally different developments at the checkout in shops on the one hand and in e-commerce on the other.
In a study, 26 percent of the consumers said that since the outbreak of the Corona crisis they have deliberately avoided using cash when shopping in stores. 35 percent stated that they preferred card payments already before. As a result, there was a 30 percent drop in cash payments in those stores that were still allowed to open. This means, Corona is giving cashless payments a very strong boost.
Debit cards currently benefit the most
Debit cards are the main beneficiaries of the shift towards card payments, with an increase in transactions of more than 10 percent. This is because debit cards are mainly used for daily purchases. The numbers for credit cards, which are mainly used for travel, restaurants and hotels, and mobile wallets are growing significantly less, each by just over one percent.
It is also very clear that the Corona crisis is strengthening the trend towards contactless payments. In a worldwide study by Mastercard, 82 percent of consumers answered that they consider contactless methods to be more hygienic. At the same time, Visa reports that contactless payments have increased by 40 percent during the crisis period compared to the previous year. The fact that the limit for contactless payments has been raised to 50 euros (80 CHF, 45 GBP) in most countries is certainly helpful in this respect. Kurt Schmid comments: "Without Corona, the consumers probably would have had to wait for this limit increase for years.”
E-commerce can benefit from Corona to the extent that consumers partly abandon their previous reservations. In a worldwide survey, 18 percent of consumers said that they had used online shopping for the first time because of the Corona crisis. This gives online retailers the opportunity to tap into new potential.
Crisis with heterogeneous effects
Overall, however, the effects of the crisis in the payment industry are very heterogeneous. For example, some credit card issuers are currently registering a decline in card sales of 50 percent and more. Acquirers have seen their processed volume fall by around 60 percent in some cases, while payment service providers typically have seen growth due to additional online shopping and declines due to lower overall consumption, roughly balancing each other out.
We can find the reasons for this in the general economic consequences of the crisis: Unemployment rates are rising, and when people have less money at their disposal, private spending falls. In addition, many consumers are more likely to switch from consumption mode to saving mode. It is to be expected that this will be more noticeable in the payment industry than in the economy as a whole due to declining transaction numbers, volumes and earnings.
At least the advantages now achieved in payment will continue to exist: Contactless limits will remain at a higher level than before the crisis. The trend towards contactless payment will also continue, now that consumers have come to appreciate the benefits. In addition, a push for e-commerce can be expected as soon as merchants are able to invest again.
Corona as acceleration for the future of payment
Previous studies have predicted a decline in the cash ratio and an increase in new, digital forms of payment for 2023. It is now noticeable that the Corona crisis is accelerating this change. Originally, it was expected that by 2023 only 28 percent would still pay with cash in the euro zone. Presumably, this will now be 1-2 years sooner and with an even faster move to digital payment.
Key role for digital payment
China is a good example of the key role that digital payment plays in keeping the economy running during the crisis, while at the same time effectively limiting the spread of the virus. This applies both to contactless payment via smartphone and to e-commerce initiatives that help smaller retailers in particular to keep their business running.
The conclusion of the webinar can be summed up as follows: Digitization is more important in all areas of the economy now than ever before. The key to success in payment lies in further improving user-friendliness – especially in e-commerce. New checkout experiences, for example through "Secure Remote Commerce", "Delegated Authentication", "Push Provisioning" and "Easy Onboarding" will support this. In mobile payment, value-added services can make mobile payment even more attractive. Ultimately, the corona crisis offers the opportunity to accelerate the development of digital payment and digital banking.
Kurt Schmid: "During the webinar, we also asked the participants how their companies are getting through the crisis. For most of them, the focus is currently on increasing their own efficiency and driving digitization further. The participants also suggested that this webinar be repeated in about six months' time, when the further development of this pandemic can be better assessed. We are happy to take up this suggestion."