Social distancing has become the new norm in the wake of the current global health situation. While this has had a negative effect on markets and businesses globally, it is also acting as a catalyst for digital transformation.
The United States and parts of Europe have long been in favor of cash payments over digital transactions. But with governments implementing lockdowns and organizations switching to remote working, these trends are seeing a dramatic shift. Despite a dip in traditional remittances, according to McKinsey, contactless transactions are growing like never before. An example can be seen in PayPal's latest report about the company processing the largest amount of transactions in the history of their company on May 1, 2020, far exceeding that of Cyber Monday and Black Friday. This is possibly because it is perceived as a more hygienic alternative to exchanging cash.
In other parts of the world, the opinion is divided on whether this is an aberration or the cusp of a paradigm shift; however, if the evolution of remittance methods in Asia is anything to go by, it can be safely assumed that the future of payments is digital, and the West is going to have to catch up.
The transition towards digital payments began in Asian countries way before the onset of the health crisis. While the USA still has a good proportion of users using cashier checks, South Korea has eliminated checks almost a decade ago. Internet users in China using online payment services rose from 18% in 2008 to 73% in 2018.
In a recent report, Deutsche Bank found that emerging economies embraced mobile payment networks before the developed world did — Alipay began in 2004, a full decade before the launch of Apple Pay in 2014. In China, the most preferred method of payment is via e-wallets such as WeChat Pay or Alipay. Cash is hardly being used within the country. It may be due to the lack or unavailability of physical banking services in developing countries, coupled with the high penetration of mobile phones, that has pushed them to explore the digital route.
The circumstances triggered by the health crisis are now compelling Europe and the US to accelerate their shift towards digitization. As the distribution of cash faces disruption, cost-effective and convenient alternatives such as digital wallets promise to mitigate the impact of the crisis and address specific business challenges.
Now is a good time for countries across the globe to usher in a new era; to digitize commerce in a way that is inclusive even towards the unbanked segments of the economy. Smaller retailers who have been forced to close shop may not be able to reopen physically, but can hope for a digital future instead. Chinese banks are already setting up simple e-commerce platforms with easy-to-use payment options to help their small-merchant client base. Banks in Italy, too, are launching similar initiatives and the rest of the world is sure to join this movement.
As the payments landscape continues to change, the introduction of new digital financial tools is redefining the way consumers and businesses send, spend, and receive funds, not just by simplifying transactions, but also by enabling businesses to optimize their cross-border payments through multi-currency, multi-wallet payment options.
An unprecedented crisis such as the ongoing medical issue calls for path-breaking solutions. As the global economy contemplates the possibility of a cashless future, new fintech tools aspire to free businesses and partners of old constraints and build upon a world of open money.
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 ‘Commentary: The COVID-19 pandemic will accelerate a shift to digital payments’, Channel News Asia, 31st March 2020, Available at: https://www.channelnewsasia.com/news/commentary/coronavirus-covid-19-digital-payment-cash-infect-china-europe-us-12583302#main
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