Why Lockdown Will Create a Payment Revolution
In the last five years, we’ve seen a range of brands going cashless, with contactless payments and mobile wallets becoming the new norm for many. The way we pay has reflected the broader change in our behaviours and expectations as consumers.
We want brand experiences to be fast, personalised and seamless. Digitally native brands like Uber and Netflix have raised the bar for simplicity and convenience in every transaction, and the rise of challenger banks like Monzo and N26 is a clear example of how innovation in financial services is following these trends. Chris Ford, senior director at Blackhawk Network, explains to Finance Monthly how the COVID-19 pandemic has accelerated these trends.
Research from social media management platform, Hootsuite, found that in the first quarter of this year, 42% of online shopping was paid for with digital or mobile wallets. But, whilst payment behaviours were already changing, this has likely been exacerbated with consumers forced to dramatically change their daily lives by staying at home and adhering to lockdown regulations. Historically, chaos has fueled innovation and from what we’ve seen it may very well be true in this case. We are about to go through a new revolution in how we pay. Those that adapt quickly will win, whilst those that don’t will struggle to survive.
COVID-19: the Renaissance of emerging payments
Right from the early weeks of the COVID-19 outbreak, businesses have started to become cashless to avoid unnecessary physical contact. Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result. As the lockdown measures were put in place, the need for alternative ways to support people throughout the crisis has also increased the adoption of alternative payment methods such as e-code vouchers and gift cards. Even the UK government reacted by setting up the supply of supermarket vouchers for families that rely on free school meals.
Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result.
The grocery industry, which has experienced the COVID-19 impact like few other sectors, has had to adapt quickly to changing shopping habits. From forming physical barriers for staff, to working with every aspect of their supply chain to maintain stock levels, innovation has been essential. This innovation has also extended to payments with a new category being born: the volunteer gift card. With vulnerable people not able to leave their homes to shop, these gift cards have let them send money to friends, families or neighbours who are taking on the grocery run.
The financial services industry has also developed new services to support customers who are self-isolating. For example, NatWest has created companion cards that allow others to pay for your shopping without having to give over your main account card. Additionally, those that can’t physically get to the shops to buy presents have turned to gift cards as a thoughtful way to keep in touch.
Innovation beyond the chaos
COVID-19 has pressured business leaders to accelerate the innovation that was already on the way. 50% of the UK population is already cashless according to Access to Cash Review published in March, and COVID-19 is seen as a way to make more of us move towards being cash-free. With lockdown restrictions not going away anytime soon, we will have a longer period of time to adopt these new behaviours and they are likely to hang around long enough to make them stick.
Before COVID-19, the demand for gift cards was already at a record high, with the total value of the global gift card market expected to reach $506 billion by 2025. With more organisations adapting to the new normal, the development and uptake of alternative payment methods will continue to increase and e-codes help to lead the revolution.
Apparently, it takes 66 days to form a new habit. Lockdown measures have already exceeded this timeframe in the UK, meaning that new payment habits are likely to be here to stay. Brands need to make sure they respond quickly to these new behaviours to keep meeting and exceeding customer’s expectations.
Our new norm as individuals was always going to change when it came to payments. COVID-19 has accelerated that shift in behaviour and it’s a delight to see so many companies rising to the challenge.