Even after the coronavirus outbreak ends, the payment needs and preferences of global consumers will still vary from country to country. In fact, they will be more diverse than ever. Still, a global trend has been the accelerated shift from traditional cash and card payments toward digital payment methods at the point of sale.
Out of social distancing necessity, the pandemic has led to increased use of contactless, digital payment methods like mobile e-wallets, bank transfers, and QR codes. Many retailers, particularly in the U.S., who have long resisted installing contactless technology due to processing fees have now been compelled to offer it.
When it comes to shopping online, installment payment methods like Klarna and Afterpay have surged in use, as they enabled shoppers suffering from the economic impacts of COVID-19 to defer payments and still buy what they wanted. Before the pandemic, apps like these were primarily used by younger demographics to break up payments on big-ticket items, luxury goods, and travel. Many consumers now prefer a ‘buy now, pay later’ option.
During the pandemic, cash obviously circulated less as brick-and-mortar retailers closed or implemented digital payment methods to avoid contact. By 2022, the markets that have remained predominantly digital are markets that had low cash use before the pandemic: the U.S., U.K., Western Europe, and large parts of Asia.
Cash-based payment methods will remain popular for some economies around the world (especially places in Latin America, where there are high percentages of unbanked consumers). But make no mistake: The world will be closer to a completely cashless society in 2022 than we have ever been.
Even before 2020, the proliferation of local payment methods was only set to increase. Now, in a world that faced a pandemic that made e-commerce a necessity, we’ve seen an explosion of new fintechs, local payment methods, and product functionalities. Legacy providers struggle to keep up as new players create integrated, easier-to-use, and more secure options for consumers.
But while there’s more competition than ever, there’s also a new spirit of cooperation and collaboration. Rivals have joined forces to innovate for global consumers. COVID-19 incentivized businesses to provide simple solutions for people stressed by a pandemic. "Coopetition" fueled complex advancements in payments tech.
Despite the havoc wreaked on the global economy, it will come out stronger than before. In 2022, e-commerce will continue to be a powerful force for good. Many consumers will have new ways to shop, and retailers now have access to larger, global audiences. Small merchants will have a bigger share of the local market and are now able to compete on the same level as big-box retailers.
Before COVID-19 upturned life as we knew it, 2020 sounded so futuristic; there were endless thought pieces in January 2020 on how the internet and AI were taking over. But, as it turned out, technology has become one of humanity’s greatest gifts, enabling us to connect, keep working, and get access to the goods and services we need.
James Booth was assisted on this article by members of his team.
