Impact of COVID-19 on Payment Industry

1. Impact of COVID-19 on Payment Industry Presenter: Srishti Dey Date: July 01, 2020

2. Agenda • Introduction • Impact of e-commerce on payment industry • Adoption of Digital Methods • Implication of Digital Payments • Key Takeaways • Conclusion • Q&A

3. Introduction • Major impact on the mobile payments industry • Consumers and businesses have been forced to drastically change their purchasing habits • Banking industry works to maintain cash access, while keeping customers safe • The economic and human impact of this pandemic is significant

4. Introduction • Drastic change on the way consumers shop • Cautious about shopping in public places • Work from home causing changes in shopping and making payments • Challenges in handling for both merchants and payment processors

5. Urge to be more cashless

6. About 38% of consumers now see contactless as a basic need or feature of payments, up from 30% a year ago. Source: The Futurist Group

7. Urge to be more cashless • Ready to embrace digital and contactless payments. • New research suggests traditionally distrustful U.S. consumers are becoming more interested in contactless payments • In Germany, more than half of payments currently made by card are contactless, compared with 35% before the coronavirus crisis hit. Source: German Credit Agency (DK)

8. Urge to be more cashless • Less physical interaction and are more secure. • However, according to one study, credit cards carry more types of bacteria than even coins or cash, while smartphones can be “a haven for germs”. • That’s why some experts still recommend keeping extra cash on hand, since banks are already taking steps to make sure any cash they handle is sanitized.

9. Source: Bain Analysis

10. Impact of e-commerce • More consumers have turned to online shopping • Groceries and household essentials as new categories • Online retailers will experience a long-term boost • New opportunities bring new risks

11. Risks of e-commerce • Supply Chain • Threat of Existing Giants • Card Fraud Risks

12. In a survey of 1,068 U.S. adults, TransUnion found 22% have been targeted by digital fraud related to coronavirus, while the number of active phishing sites skyrocketed from 149,000 in January to more than 500,000 in mid-March, according to a new report from Atlas VPN. Source: TransUnion

13. Visa says contactless use surged amid COVID-19 • Surge in Tap n Pay usage with 31 million U.S. consumers using a contactless Visa card or digital wallet in March 2020 • It compares with 25 million in November 2019, and overall contactless usage is up 150% since March 2019 • US has 175 million contactless cards, the largest number in any international market and nine of the top 10 issuers are actively rolling out contactless cards to their members Source: MobilePaymentsToday

14. Mastercard study shows COVID-related shift to contactless • The global survey shows 79% of consumers are using contactless payments, citing safety and cleanliness as the key driver • The study shows a huge increase in concern over cash usage, with 82% of respondents stating contactless is a cleaner way to pay. Contactless payments are up 10% over any other in-person payment method.  • In addition, 74% plan to continue to use contactless after the pandemic is brought under control. • The survey was based on online interviews of 17,000 consumers in 19 countries worldwide Source: MobilePaymentsToday

15. Digital Payment Methods • Digital Wallets • Contactless Card Payments • SMS Payments • Tap-n-Pay

16. Implications for digital payments • Perceptions may change payment behavior by users and firms • In the medium run, the outbreak can lead to both higher precautionary holdings of cash by consumers and a structural increase in the use of mobile, card and online payments. • Differ across geographies, and consumers • Not all digital payments are immune • Recently, authorities, banks and card networks in many countries have set higher transaction limits for contactless payments.

17. Solutions of digital payments • Payment solution where no physical contact of the same object by multiple persons takes place are potential solutions • Online payments for e-commerce are of course not open to the virus transmission. • In many of the emerging market and developing economies where authorities have recently called for greater use of digital payments, access to such alternatives is far from universal. This could remain an important debate going forward, potentially asking for a strengthening of the role of cash.

18. Factors leading to adoption of digital payments • Cash loses value • Growth of e-commerce and m-commerce during coronavirus outbreak

19. Merchant Considerations for Protecting Payments during COVID – 19 crises • Reliability • Customer Payment Journey • Safety

20. Key Takeaways • Public concerned about transmission of coronavirus by cash • Scientific evidence suggests that the probability of transmission via banknotes is low when compared with other frequently-touched objects, such as credit card terminals or PIN pads • To bolster trust in cash, central banks are actively communicating, urging continued acceptance of cash and, in some instances, sterilising or quarantining banknotes. Some encourage contactless payments. • Looking ahead, developments could speed up the shift toward digital payments. This could open a divide in access to payments instruments, which could negatively impact unbanked and older consumers. The pandemic may amplify calls to defend the role of cash – but also calls for central bank digital currencies.

21. Concluding lines • Slow rate of adoption until 2019. • COVID-19 pandemic increased the adoption of digital payment solutions significantly. • Various economies at different stages of development across the world; the outbreak has forced people to change their shopping habits, paving the way for digital payments. • We can hope that the coronavirus crisis will be eliminated soon, but the ever-growing number of smartphone users will drive the growth of digital payment in the future. • As more competitors will come up with digital payment platforms, customers will certainly get an improved experience. Be it a digital wallet or other contactless methods, the digital payment solutions are here to stay.

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