From cashless to digital: The Covid-19 tipping point
CAPE TOWN – People’s safety concerns about transmission through contact have resulted in Covid-19 becoming a catalyst for the adoption of cashless payments globally and even more so in South Africa, with the disruption expected to effect lasting changes in the way people transact with cards and cash.
While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis is rapidly accelerating the adoption rate with more consumers seeking safer, contact-free payment methods.
This rapid adoption of digital payments will help shape a new normal as businesses begin to emerge from the more stringent levels of lockdown regulations and attempt to navigate their post-Covid-19 futures.
Derek Cikes, commercial director at Payflex, said the pandemic represented a watershed for the payments industry.
“The acceleration towards a cashless society is one of the key opportunities that has emerged from the pandemic, bringing the advantages of digital payments to the fore including lower fees, convenience, seamless delivery, greater security, and more flexible payment options,” said Cikes.
He said what made this trend so interesting was that historically, people used to hoard cash in times of crisis. Now, the opposite was occurring.
A study by MasterCard revealed that since the beginning of Covid-19 in South Africa, 89 percent of South African respondents have been using contactless methods to pay for groceries, 60 percent for pharmaceutical items, 39 percent for other retail items, 15 percent for fast food, and 8 percent for transport.
Similarly, recent figures from Bain echo this, with estimates that by 2025, the adoption of digital payments could accelerate by a 5 to 10 percentage point increase globally, above what was previously anticipated at 57 percent before Covid-19 to 67 percent after Covid-19.
Are contactless payments here to stay?
Cash is perceived as a vehicle for the transmission of the virus. As stores, restaurants and other merchants begin to open their doors again, contactless payments are key in providing consumers with a much-needed sense of comfort and reassurance.
“Businesses have no option but to rethink their use of shared payment surfaces, with customers more conscious than ever of what they touch. People don’t want to touch ATM or PIN pads or have to hand their cards to store tellers. Once viewed as a convenience or nice-to-have, digital payments are now viewed as a critical service, providing a solution to limiting contact with other surfaces,” said Cikes.
Creation of new payment habits
From banking facilities such as tap-to-pay, payment apps such as Zapper and Snapscan, to digital banking and eWallet providers, South African fintech firms have reported significant increases in the use and adoption of digital payment methods since the outbreak began in March. The simple truth is, while these channels provide a convenient way of paying, they are also contactless, allowing consumers to pay for their goods while not having to exchange cash or cards with merchants.
“The perception of cards and cash as vehicles for transferring microorganisms has changed how people physically interact with their payments in favour of contactless options. With health and safety being top priorities, we anticipate this trend to become more permanent with hygiene measures and social distancing likely to become part and parcel of our daily realities for years to come,” said Cikes.
Retailers drive adoption of digital payments
Both online and brick and mortar retailers are helping to accelerate this trend with stores such as Mr Price enabling consumers a contactless way to pay in-store pay via their app, and most South African retailers offering tap-to-pay-methods. There is also an expected uptick in omnichannel capabilities (being able to sell your goods through many channels such as website, app, retail, third-party platforms such as Amazon or Shopify) which bridges payments in any environment, physical or digital.
Another contactless payment method driving this trend is eWallets with over 500 million mobile money users expected on the continent in 2020. In addition, it is anticipated that the capabilities of digital wallets will expand to offer features such as digital IDs and transaction monitoring and reporting, which is expected to create even more growth for this payment mechanism.
Flexibility needed more than ever
According to TransUnion’s Financial Hardship Survey, conducted in the United States, United Kingdom, Canada, India, Hong Kong and South Africa, one in six people lost their job in early May, with defaulting on their bills just seven weeks away. 82 percent of consumers indicated their household income had been impacted, and on average, consumers who were impacted, expect they will be short by R7 542.90 when paying bills or loans.
“Many people are financially stretched and need the support of alternative payment solutions to help manage their cash flow without incurring further credit card debt,” said Cikes.
A report by GlobalWebIndex showed that 83 percent of South African consumers are expecting flexible payment options from brands.
“We have seen this play out in the increased uptake of our Payflex Buy Now Pay Later payment solution, which allows people to make interest-free payments over two paychecks,” said Cikes.
With health, safety and financial security at the forefront of consumer sentiments, companies will need to provide payment options which meet these consumer needs.