How COVID-19 is Changing The Payments Landscape
Isn’t it interesting when we, humans, plan and project the future only to have everything we thought was true changed by a single turn of events? Who could have predicted the spread of COVID-19 and even more so, who could have foreseen the countless ways it would affect our lives? The answer is simple: nobody. Predicting is not something we can hold ourselves accountable for, but reacting definitely is. The virus has brought a new world order and the global payments landscape did not stay unaffected. How does the virus change payments, what should you expect, and most importantly, what strategic decisions should your company be thinking about?
Contactless Payments Are The Present
Contactless payments used to be the future of the payments sector but the pandemic fast tracked process, making them the present. According to the 2020 American Express Digital Payments survey, 58% of Americans who used contactless before the pandemic, are more likely to use it now than before the coronavirus. Similarly, some Chick-fil-A stores are banning cash in trying to make their POS healthier and more approachable, according to a Business Insider article. If all of the above is not convincing enough, then you have news straight from the source, as Mastercard announced that:
“Perceptions of safety and convenience have spurred a preference for contactless cards and reminded consumers of the convenience of tapping on a global scale. Globally, nearly half of respondents (46 percent) have swapped out their top-of-wallet card for one that offers contactless – this proportion climbs to 52 percent among those under 35 years old.”
The shift has been rapid and if stats and numbers are anything to go by, this is not a temporary spike. The argument for contactless payments is no longer an argument for convenience and leisure but rather one of necessity and health.
The Impact is Both Global & Granular
A recent report by McKinsey builds a credible case on the impact of the virus on a global stage. The report creates different scenarios based on variables such as the “fiscal, monetary, and broader public response”, trying to see a best case and worst case scenario for the global economy. Logic dictates that the truth is somewhere in the middle.
What can be said with certainty is that the payments ecosystem has taken a beating, with the ripple effects clearly outlined in the table below. As you can see, depending on the industry, the virus has brought about a different set of implications to its payment processes. Hospitality for example, is one of the most obvious victims of the pandemic whereas online food delivery is spiking.
The Need For Online Fraud Prevention is at an All-Time High
If ever there was a time to consider fraud prevention for online payments, that time is now. The Central Bank of Ireland has made public that ATM withdrawal amounts were down 57% compared with the first week of March. With that in mind, you can understand that the bulk of payments is happening online. The exposure of people to digital attacks and frauds has never been higher.
The United States Department of Justice already announced measures regarding online fraud during the pandemic. Specifically, the DoJ urges people to be:
“Be wary of any business, charity, or individual requesting payments or donations in cash, by wire transfer, gift card, or through the mail. Don’t send money through any of these channels.”
Being locked in our houses effectively means that communications, niteractions, shopping, and so many other endeavours that used to have a physical form, are now forced to go online. That opens the door so much more opportunity for corruption and fraud and people that are not well-versed in reading the signs of what could be an online attempt to steal money or data, or open to such attacks.
The need for online payment security has never been higher. Thankfully, the response has been promising. The World Health Organization released a statement on how not to become a victim of COVID-19 scammers. Similarly, INTERPOL released its own safety measures statement urging people to be careful and what to look out for. Whilst actions like that are both welcomed and useful, the reality of the situation is that a more permanent solution will need to be set in place. That solution is not something new, but the virus outbreak seems to be putting the spotlight on it. What solution are we referring to? Artificial intelligence.
Automating KYC processes and fraud prevention checks has been billed as the “next big thing” for payment fraud prevention for quite some time. Now, it’s the time for this unique breed of technology to shine. A recent article by The Paypers online publication, makes the case for it very eloquently:
“AI has ensured that companies are well-equipped to take on the kind of nuanced, highly sophisticated fraud now being carried out around the world. It quickly alerts analysts to anomalies, develops trend-based insights and discerns if a given transaction or series of financial activities are unusual or fraudulent.”
The landscape is changing and the changes won’t stop any time soon. Here at BigWPay we will keep our antennas up and our ears open and we commit to bringing you the latest news and insights of the market.