How the COVID-19 pandemic has accelerated the shift towards digital payments
Written by : Anabelle Mumby
COVID-19 is a global pandemic that has brought human contact to a halt and reshaped the world to adapt to a more stay-at-home lifestyle. This new way of living has ultimately highlighted the deficiencies in our current outdated payment systems as it has been unable to accommodate to the changing world’s new demands.
Payment methods have evolved steadily alongside society throughout the ages. There was a time where money did not exist, and payment was made by exchanging goods and services; livestock a key factor in determining wealth. However, as time passed, it became evident that transacting solely in this way was unsustainable as livestock was not always portable.
Precious metals, including gold and silver coins, became the payment method of choice as they represented value and were portable — this was until goods and services became more “expensive” and it became impossible to carry multiple coins around at once as they were heavy.
Paper money was invented as a lightweight option to use in addition to coins. However, people began to realise that carrying around a large amount of cash was unsafe. For this reason, cheques were offered as an alternative payment method; one piece of paper representing a value. Despite this, cheques were easily destroyed, easy to forge and misplace. For this reason, the first plastic card was invented in 1959.
Plastic cards, including credit and debit cards represent a stored value; easily portable and difficult to destroy, allowing users to store their money digitally — safely, securely and ultimately more efficiently, with the option to access their funds in cash form when they needed by withdrawing from an ATM. Although the debit card was notably the first “digital leap” in payments, it has evolved at an incredibly slow pace ever since partially due to the technology used and mainly due to the fact that the world has not yet demanded drastic change.
Flash forward over fifty years to 2019 (pre-COVID), card payments are still the payment method of choice with over 22.8 billion cards in circulation worldwide and cash use has been on a steady decline of 15% per year.
The shift towards digital payments was inevitable, however, there has been approximately three to five years of acceleration in as little as three to five months due to COVID-19. 80% of the population now prefer card payments over cash and cash use has declined a further 35% since the pandemic began. This is largely due to COVID-19 forcing stores to close leading to an increase in e-commerce and online payments. In addition to this, the stores that were allowed to remain open (e.g. grocery stores) became hesitant to accept cash as payment due to the increased risk of contamination, ultimately causing a surge in the demand for contactless payment.
Payment by QR has skyrocketed since the beginning of the pandemic; with as many as 1.5 billion users in 2020 due to the appeal of its contactless transaction. This proves that more people are accepting and becoming more accustomed to digital life. Going forward, 57% of consumers say they will continue to use contactless payment and 75% of people say they will use less cash post-COVID proving that digital life is here to stay.
However, crisis is the mother of innovation and the deficiencies in our current outdated payment systems are still lingering; banks high fees, need for stronger security, advanced authentication and better transaction decisioning. As technology advances, consumer expectations rise and naturally as humans, we look for more efficient, alternative solutions to save time and money.
COVID has proved that our current payment systems do not just need enhancements, they need total reconstruction. To quote the CEO and founder of WadzPay, Anish Jain; “We have electric cars but paper money!” These changes are especially necessary during times of crisis when there is a surge in demand for remittance and increasing demand for cross border transactions where people are tired of high fees.
Blockchain is the next stage in our digital evolution; low transaction fees, strong security, advanced authentication and superior transaction decisioning. In simple terms, it’s cheaper, faster and secure. The shift towards blockchain, leads to the shift towards digital currency and whilst Cryptocurrencies continue to be too volatile to use on a regular basis (potentially offering huge gains for investors but also huge losses), stable coins and CBDC (Central Bank Digital Currency) offer the best of both worlds: digital assets that provide price stability therefore tackling the issue of volatile swings whilst also ensuring a more efficient method of payment.
Despite the challenges and personal tragedies, COVID-19 has accelerated the transformation and digitalisation of our current payment systems and ultimately, we will become stronger as a global economy. It is already evident that people have learned from this experience, with a 300% increase in investment traffic over apps like Robinhood, Freetrade and Trading212, people want to ensure they have savings for times like these in places other than a bank.
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WadzPay.com is Driving Financial Inclusion whilst enabling broader acceptance. WadzPay will become THE DEFAULT Digital Payments Processor. We will build direct relationships between Financial Institutions (FI)/non-bank Financial Institutions (NFI), merchants and consumers. The WadzPay token WTK is available on Bitmart now.