In the current state of things, no one has a clear understanding of how long coronavirus and its effects will last. This includes economic repercussions, the ways in which companies need to alter their practices and how consumers interact with both corporations and each other. Nearly all interactions will change in the coming months; in fact, many already have — including within the payments and banking industries.
Based on the current environment and the macro developments in the commercial landscape of the U.S. and U.K., the following payments and banking trends are predicted:
Reduction of cash. The World Health Organization is reportedly encouraging people to use as many digital payment options as possible in the wake of the pandemic. Physical means of payments, such as cash and checks, have experienced a significant reduction in both usage and acceptance. During March, cash usage was halved, according to Links, which operates the U.K.’s largest ATM network. Now is the time to promote and design digitization programs for commerce and the economy.
Contactless commerce. The fear of contact has increased the use of contactless payments. Cashiers are being trained not to take cards from customers and to promote the insertion of cards into readers by shoppers as well as talking to customers about in-app purchase while in the store. The impact of local shopkeepers who actively encourage customers to use contactless payments will convert some of the more reluctant users.
Access to digital payments and banking tools. The economic downturn is bringing to the surface a longstanding divide over the cost and accessibility of digital payments. Not everyone has the same level of access to the necessary technologies and tools to achieve full digitalization of their business. Businesses without access to digital payments lose out more as remote buying increases. Now is the time to design setups where all businesses and consumers, irrespective of their demographic, economic situation and education, have access to engage in the new-normal economy.
Security front and center. As the economy starts rebuilding, businesses will want to hurry to onboard new clients, new suppliers and new employees; this will also occur while most businesses are understaffed and their back offices are underinvested. Data security, identity and transaction fraud are likely to experience significant growth during this period, and we expect security services to become critical for the future economic rehabilitation.
A focus on more sustainable business models. The magnitude of COVID-19 is still unclear, but it's apparent the crisis will continue to have a material impact on M&A activity worldwide; investors are highly likely to lean away from the relatively riskier ventures of investing in startups. Fintech companies should prepare for a less funding-friendly environment in 2020. In this environment, we expect fintech companies to shift focus to a more sustainable business model that isn't dependent on the constant inflow of external investor money.
Collaboration between big and small. The cashflow and profitability crunch, propelled by the economic downturn, will likely lead to significant changes in the fintech and banking industries. In the post-COVID-19 world, banks will be forced to organize themselves to meet evolving needs of small business and/or retail businesses, particularly as it relates to the rising demand for new digital services. Banks will consider structural moves on the use of cloud-based infrastructure, automation and analysis-driven decisions to reimagine the digital customer experience.
Fintech companies, in turn, will look to take advantage of that new revenue and customer pool. The data interoperability involved is dependent on a new model of collaboration between the financial services companies, fintech companies and regulators. Banks and fintech companies will have to play well together support this new landscape.
