A new cashless society? COVID-19 pushes digital innovation in payments
A not-so-quiet transformation in all aspects of life
COVID-19, or more so its impact on a new and developing social isolation, is shaking-up consumer and business behavior worldwide. While the scope of the revolution is yet to be decided, changes are happening at a fast pace and many businesses are changing their models to normalize the current situation and allow consumers to continue with their business uninterrupted, while minimizing human (physical) interaction dramatically.
Even prior to COVID-19, the world has been amidst a process of moving towards a cashless economy, and the use of eWallets and alternative payment methods was already on the rise. While the original estimation for APM spread was forecasted to increase exponentially by 2024, recent events have made it clear that the new reality will push this estimation much higher.
Online banking & payments take the forefront
A recent recommendation from the World Health Organization (WHO) asks consumers to use contactless payment methods and avoid cash payments (as, in addition to involving human interaction, cash has the potential to transfer the virus via the organisms on it). That statement has sparked new initiatives taken by banks/payment companies to cope with the new reality.
Banks and financial institutions have announced various contingency plans and initiatives to streamline operations in spite of lockdown. Such an example can be found in South Korea, where the main bank instructed that all cash received will be held unused for two weeks before disinfecting it and returning it back into circulation.
Many countries around the world are also encouraging the adoption of alternative and contact-free payment methods. The initiatives are often backed by the governments and fees are waived to encourage use. In Africa, for instance, Governments and startups are implementing measures to shift a greater volume of payment transactions toward mobile money and away from cash – when COVID-19 cases began to spread across the continent’s major economies, Africa’s leader in digital payment adoption — Kenya — turned to mobile-money as a solution to stem the virus’s spread in the bud. The country’s largest telecommunication company, Safaricom, implemented a fee-waiver on East Africa’s leading mobile-money product, M-Pesa, to reduce the physical exchange of currency.
The increased concern regarding the use of cash could help speed up the adoption of alternative payment methods in markets that it hasn’t been very popular in (e.g. South America), and kickstart a unifying effect of payment methods around the world – or at the very least increase the usage of apps and remote payment and banking options more than ever before.
What challenges are we facing?
COVID-19, by driving people indoors and inadvertently creating an increase of online-based economy, has also created a breach in potential fraud risks.
Reports of email phishing campaigns using COVID-19-related topics surfaced almost immediately after confirmed infections began increasing in January 2020. COVID-19 has also been a popular topic of discussion on cybercriminal forums, posting methods to deliver malware via an email attachment disguised as a distribution map of the virus’s outbreak, containing real-time data from the World Health Organization.
As COVID-19 also pushes a growing number of users online for work, commerce and banking, it’s also expected that as banking and payments increase their online presence, that fraudsters will also find new ways to lure innocent users into their traps – whether via email communication, apps or phishing. Because these sectors are therefore becoming more vulnerable, it becomes even more paramount for them to fortify their services from unwanted scams and to reassure customers that they are in good hands.
Providing adequate customer service and handling volumes
A potential drop in-branch visits will challenge banks’ digital capabilities and customer experiences. Many banks had to close down branches or minimize frontal service to a minimum. Since customers will still need to access their money, banks will need to cater to more digital channels and call centers, making digital the primary channel for a greater portion of customers across the world. This migration to non-branch channels will benefit banks that enable customers to handle a wide range of banking functions through online or phone channels while hurting those with more limited offerings, and it will test their ability to handle the increased strain of higher volume.
Accommodating challenges of first-time-users
Beyond whether or not customers can carry out banking functions through alternative channels, greater usage will test how easy to use those channels are, especially for first-time users whose usage is a direct result of coronavirus concerns. For that reason, banks should strive to simplify their online and call center interfaces or roll out information and educational materials that instruct customers on how to make the most of non branch channels to manage their funds.
Does the future lie in remote solutions?
The short answer is that there may not be any other choice. The current situation has put survival and health first, and forced financial institutions to adapt accordingly.
The good news is, that there are several countries that have already started adopting cashless/remote methods where a lot of things -banking and payments included – are done remotely or on-the-spot, but without contact (e.g. payment apps). In fact, in Sweden, the use of cash is so scarce that businesses now need to have a certain amount of cash aggregated before they can even deposit it in the bank. The majority of retailers prefer handling less cash. Swish and leading mobile payment methods such as iZettle make it easier for small business owners in Sweden to operate cash-free. Both have been a driving force in the reduction of cash circulation in Sweden, according to KTH Royal Institute of Technology.
China is another leading example of a cashless economy where, according to a survey conducted by Rakuten Insights (March 2020), 97% of respondents stated that they make transactions via e-payment methods, while only 1.6% are not.
It’s slowly revealing that the move to online solutions may be inevitable, and what businesses and institutions now need to figure out is how to minimize the challenges associated with such a move (e.g. customer experience, increased fraud etc.). Eventually, even when this pandemic is over, online solutions are the future, mainly for convenience and efficiency reasons, and now as it turns out – also for health reasons.