The Covid-19 outbreak is prompting people around the globe to avoid touching just about anything outside of the home. In addition to mass gatherings, potentially virus-carrying surfaces are now to be avoided whenever possible in the effort to stem the spread of the deadly disease.
One such surface that has been called into question is money. There is no question it gets touched as it changes hands rapidly. While no study has definitively pinpointed bills or coins as a virus conduit, the concern around it is causing many to embrace digital and other forms of payments.
Danny Chazonoff, COO of Paysafe, recently authored an alternative payments guide in the wake of the outbreak. Card Not Present spoke to Chazonoff about the new trends in payments now that Covid-19 has dramatically altered life, and which forms of payment are seeing an upswing in use among consumers.
CNP: How are people using alternative payments during this pandemic and why?
Chazonoff: Consumers in many global markets are under strict stay-at-home orders and, therefore, don’t have access to their usual payment methods. Brick-and-mortar stores that remain open are switching to contactless payments to reduce the spread of the coronavirus, and they are also encouraging alternative methods of payment such as mobile wallets that best suit the needs of their customers.
Although the WHO (World Health Organization) has not issued an official warning against using cash, rather advising consumers to wash their hands thoroughly after handling it, the psychological perception remains. It’s therefore understandable that both consumers and card-present merchants are currently reluctant to use cash.
Is any single alternative payment method emerging more than others right now?
Chazonoff: The current restrictions imposed in many countries could be enough to introduce mobile payments to a new generation. One of the main reasons certain consumers have shied away and avoided digital and mobile commerce previously is because of a reluctance to share their financial details online or have a digital record of their purchases.
This is set to change. With traditional banks providing more online options, we’re expecting to see a surge in adoption. These services offer customers a variety of payment methods such as UPI, credit and debit cards, as well as net banking. In Italy, mobile transactions have soared 81 percent since the end of February, according to estimates by McKinsey & Co.
The current situation with Covid-19 could also see a surge in the adoption of mobile wallets such as Apple Pay or Google Pay. Like contactless cards, they are embedded with near-field communication (NFC) technology that can be used for proximity payments via radio waves, and they’re used in much the same way.
Mobile wallets are known for their smooth and seamless customer experience. It’s not just a faster checkout—all devices are supported, giving customers the option to check out from a desktop, laptop, tablet or smartphone.
Is there any advantage to using one over another?
Chazonoff: There are a variety of advantages for different alternative payment methods, depending on the needs of the individual consumer.
- Mobile payments and wallets bring extra layers of security because they’re housed within the confines of a cell phone, and transactions are made using authentication, monitoring and data encryption to secure your personal information.
- Digital wallets can also allow consumers to deposit and withdraw easily. For those who are unable to reach grocery stores or pharmacies, the safest way to transfer money to each other is to make person-to-person (P2P) payments using digital wallets, which have user-friendly deposit and withdrawal methods linked to a bank account.
- A digital wallet also doesn’t rely on sharing financial details. In many cases, only the recipient’s email address is required to make a transfer.
- Then there’s online cash, or e-cash, which is important for helping take the cash consumer online. A rejection of cash due to the coronavirus and an accompanying shift to digital commerce will be a challenging adjustment for cash-loyal consumers, particularly for those who are unbanked. That’s why, during this period of social and economic uncertainty, providing a smooth transition from retail to online payments will be vital. The most effective way for online businesses to accept cash is by incorporating an e-cash solution into an online checkout. This can be done by enabling a customer to pay for a product or service using a prepaid account that is topped up by cash, or by allowing a consumer to make a purchase using an online platform, which can be completed at a physical pay point (such as a supermarket) with cash. This gives the buyer the option to maintain cash as their primary payment method.
- Then, there is the issue of money transfer to think about, especially when it comes to financial inclusion. The travel ban means that supporting new Americans and immigrants to send money home quickly, easily, and at a low cost will be vital to keeping their family and friends financially solvent. This is where effective remittances channels come into play. Combatting the specific issues caused by the crisis is essential, for example financial inclusion for those needing financial support for the first time, or new access to digital payment methods because of displacement and isolation. Outside the US, in Canada and Europe there are services that are designed to help expats, immigrants and others living overseas to send money home to their families and friends more securely, more efficiently, and at a lower cost than traditional bank transfer services. Bank transfers also require both sender and recipient to have a bank account.
What does this mean for merchants? Do they need to be doing anything differently in light of these new payment patterns?
Chazonoff: Ultimately, raising consumer awareness of what alternative payment methods are out there and which one is right for each individual, is vital. However, it’s not just down to the consumer – for consumers that rely on cash, the short- and long-term impact of relying on digital products and services is going to be significant.
The current situation is driving brick-and-mortar retailers and store owners to more fully embrace e-commerce and m-commerce. Payments are key to optimizing their online retail offerings, such as providing consumers with a comprehensive suite of payment methods – digital wallets and e-cash solutions in addition to card payment processing.
Card-present merchants with online offerings and standalone e-commerce merchants have a responsibility to their customers to take this into strong consideration when thinking about the evolution of their checkout, especially if they want to attract new customers and retain loyal ones. Offering payments choice, including enough alternative payment methods to meet every consumer’s specific needs, enables merchants to reduce cart abandonment and allows them to strengthen their customer funnel to maximize revenue and ultimately profit.
And in the challenging times we live in, the adoption of alternative payment methods can make the difference in a merchant’s viability as a business.