The coronavirus pandemic has triggered a boost in demand for contactless payments, accelerating a trend that was predicted to take several years to emerge – cash is no longer king. Health and safety are a primary concern and have influenced consumer behaviour patterns, forcing retailers to expedite their adoption of digital payment technologies. There are fears associated with the transfer of physical cash and touching public surfaces such as payment terminals which have translated into a surge in digital and contactless payments. According to the World Payments Report by Capgemini, digital payments grew by 53% in 2020.
Another payment solution that has become mainstream as a result of the pandemic is Buy Now Pay Later (BNPL). Companies such as Afterpay and Klarna have prospered; consumers are under financial pressure as many have lost their jobs or have been put on furlough over the last 18 months. Rather than paying the total amount for a product or service upfront, BNPL allows for households with restricted incomes to pay for goods and services in separate instalments. The ability to control spending and the convenience of BNPL has contributed to the rise in popularity of this digital solution. According to Forbes, the US buy-now-pay-later market is expected to grow by 41.7% on an annual basis to reach over $126 million in 2021.
There have been seismic changes in the payment industry before. Similar to how cheques have been made obsolete and replaced by debit cards, many are anticipating a cashless society that will be made possible through digital payments. The transition towards these new payment methods was already afoot. However, the industry has undergone years’ worth of change in the space of a few months.
Due to worries surrounding the security and confidentiality of personal data while using tap-to-go cards and mobile wallets, some consumers have been slow to embrace this technology. However, Covid-19 has disrupted many aspects of society, including the payment sector. Thus, encouraging the use of digital payments to stop the spread of the virus. There has been steep growth in the number of consumers using contactless transactions – Barclaycard has announced that contactless payments accounted for almost 90% of card transactions in the last year.
Today’s consumers are demanding both speed and efficiency at checkout, which is one of the main reasons we were beginning to see a shift towards digital payment methods before the pandemic. The simplicity of paying with mobile phones and smartwatches is a leading factor contributing to the growth of digital payments. In the current times, faster and germ-free transactions have piqued consumers interest in this form of payment, pushing retailers to incorporate contactless payment functionalities.
As consumer needs evolve, businesses must be agile and swift – they should make necessary changes to their business models to accommodate new industry trends. Security and confidentiality are at the forefront of the conversation and are hindering the widespread adoption of digital payments. To eliminate these concerns, the industry must focus on implementing new ways to ensure the safety of consumer information and personal data. Moving forward, BNPL is also expected to see continuous growth as consumers are demanding convenience and more diverse payment options. As the financial market continues to change, businesses must conform to meet customer expectations.