The Corona pandemic: A catalyst for digital payment

The Corona pandemic has changed many things in the last six months – including the way we pay. There is now a whole range of studies and research on this. Netcetera has collected and analyzed data from various sources to be able to give a qualified assessment of the situation and a realistic outlook.

The pandemic clearly has a very strong influence on the shopping and payment behavior of consumers. In a survey, for example, only 5 percent of German participants stated that they had not changed their lifestyle. In the USA the figure was also 5 percent and, in the UK, only 2 percent. On the other hand, 35 percent of Germans use less cash (British: 63%) and 30 percent shop more online (British: 46%).

Shift to online shopping and cashless payment

The more intensive use of e-commerce affects a wide range of industries. For example, 13 percent of Germans and 14 percent of Britons now prefer to order their food online from a delivery service instead of going to a restaurant. Clothing is now bought by 20 percent of Germans and 12 percent of Britons in online shops instead of stationary shops.

Significant shifts also affect payment methods, as the example of Romania shows: There the proportion of those who prefer cash has fallen from 45 percent in the pre-Corona period to 21 percent. Contactless cards are now used by 59 percent of consumers, compared to 50 percent before Corona. The use of mobile payment has increased from 12 percent to 17 percent.

Overall, there are signs of a shift in both payment methods and payment channels. There is a clear trend away from cash and towards local debit card procedures, credit cards and mobile payment. The trend away from offline payments towards online payments has also increased. Before Corona, estimates assumed that e-commerce would account for 14.5 percent of total retail sales in 2020. In the meantime, it can be assumed that this figure will rise to over 16 percent.

Increases in card use and card misuse

The change in consumers' payment behavior can also be seen from the fact that the number of card transactions has increased while the average payment amount has decreased. Consumers are therefore increasingly paying smaller amounts without cash.

However, the increased use of payment cards also has the "side effect" of increasing card misuse. The Association of Certified Fraud Examiners (ACFE) has conducted a worldwide survey on this issue. The result: While in May 2020 about 60 percent of the respondents observed a slight or significant increase in the area of payment fraud, in August the figure was already 68 percent. A further increase in payment fraud in the next twelve months is expected by 85 percent.

Acceleration for e-commerce

E-commerce has already grown strongly in recent years. Corona is now helping to accelerate this development. Before Corona, it was assumed that global e-commerce turnover would increase by 15 percent in 2020 compared to 2019. Now it is becoming apparent that this year's sales growth will be 25 percent. For 2021, a sales increase of 22 percent is now predicted – instead of the 12 percent expected before Corona.

One reason for this development is that many people who previously had reservations about online shopping are now turning to e-commerce after all. Corona has persuaded 18 percent of consumers worldwide to shop online for the first time. This makes it all the more important to show these people that their previous reservations were not justified by making shopping and payment processes as simple and seamless as possible.

Challenge of PSD2 regulation: Strong customer authentication

A challenge for smaller online merchants in Europe is that from 1 January 2021, the Payment Services Directive (PSD2) requires strong customer authentication. To support this in practice for card payments, merchants, acquirers and card issuers will need to upgrade to the 3-D Secure 2.x protocol. However, currently only 10 to 30 percent of the transactions sent by merchants/acquirers are based on this standard.

Kurt Schmid, Marketing & Innovation Director for Secure Digital Payments at Netcetera: "There is enormous pressure for online merchants to act, otherwise considerable losses can be expected from the beginning of 2021. To support them in the transition to 3-D Secure 2.x, we have set up a 'Merchant Testing Platform' together with Mastercard. This enables online merchants to carry out end-to-end tests without much effort". The test platform can be found here.

Kurt Schmid: "All in all, it can be said that the pandemic has triggered a sustained push for digitalization in payment transactions. In order to be able to take advantage of the associated opportunities, it is crucial to make checkout processes and the associated payment processing as user-friendly as possible, both at the POS and in e-commerce. The technology required for this is available".

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