The COVID-19 global pandemic has inevitably changed the course of digital payments. As consumers have been holed up at home and quarantining, they’ve also been able to do more and buy more online.
Scrolling through “Seamless” or “Doordash” for dinner, maybe followed by “Drizly” for alcohol purchases, has now replaced an evening out with friends. A pre- or post-work visit to the local gym has now become a Zoom workout class, followed by a Venmo payment to that favorite fitness trainer.
These consumer lifestyle developments have changed the way consumers interact with businesses, large and small. Because of this new reality, which we’ve all had to embrace this past year, there is opportunity for payment apps and banks to provide innovative and value-added products and services. As consumers are becoming more reliant on apps and mobile devices in their interactions with businesses, the expectations and threshold for the consumer when it comes to digital payments experience has risen dramatically.
With this backdrop, we can expect several developments:
Partnerships between payment apps and businesses. Look for more win-win partnership activity in the area, like exclusive relationships or rewards programs, which will drive sales for businesses and in turn increase payment transactions and volumes on payments apps.
The continued infiltration of social media channels. Payment apps will Integrate further into social media and chat channels, resulting in more purchases by consumers on social media apps. Today, consumers can already buy direct from brands via social media channels, like Instagram. Payment apps can become channel partners to these platforms, adding new payment features like allowing consumers to split payments with friends directly on a social media platform.
Added convenience for businesses to receive payments. Payment apps can offer more convenient ways for businesses to receive payments from consumers, such as via automated payments. Businesses could benefit from the functionality of recurring payments or a feature that helps businesses collect from their customers on time.
Payment apps will follow new lifestyle trends. Though more countries are rolling out vaccinations, life after the pandemic is expected to be a “new normal,” not a return to the way things were. Payment apps will identify new lifestyle trends and partnerships with related businesses will form. For example, consumers may initially engage in more regional and domestic travel versus investing in longer international trips. Payment apps will take advantage of new trends by partnering with regional airlines, hotels and destinations or offering value-added features like multicurrency payments.
The increase in peer-to-peer and consumer-to-business payments, across a variety of different payment platforms, also presents an opportunity for banks to consolidate consumer spending data into meaningful insights. As the original source of consumer funds —
via a checking or savings account or a credit card — banks are in a unique position to provide the best data analysis to consumers to help them analyze how they spend their money and how to engage in better financial management. In addition to banks, other players in the widening open-banking ecosystem will likely compete to offer services to consumers in an effort to gain the most exposure and credibility related to how, when and where consumers spend.
Services like Mint or You Need a Budget (YNAB) provide robust financial management services already, but often require consumers to manually "engage" in order to label specific spend categories. Banks rarely do more than show pie charts of spending categories or a few data points on monthly spending shifts. Opportunities abound to create web- and mobile-based financial management experiences that delight, engage and retain customers.
COVID-19 has taken a great deal away from us in the past 12 months, but from a digital payments perspective, it has also opened the doors for new innovation and activity. We will see stronger relationships and partnerships between payment apps, banks, consumers, and the businesses consumers patronize (even if it’s on Zoom).
