The coronavirus pandemic and the subsequent lockdowns that have been imposed to put it under control have changed the world significantly.
COVID-19 is a pandemic like no other. The virus is spreading like wildfire and no one is safe or immune from its effects. Governments are in crisis mode and people are airing their frustrations every day on social media.
The ongoing situation, where record economic measures are being taken, and strict regulations restraining people's' finances are being imposed, has never been taught in any business school nor does it feature in any economics textbook. Nobody truly knows how much devastation this virus will cause before it is put under control.
Apart from the new economic records that are being set, and fiscal policy limits being broken, the way people are using money has changed.
Paper currency is no longer the preferred currency for spending as it is being replaced by a digital currency which is handled by payment providers like Mastercard and Visa.
Stores in many parts of the globe, including large grocery store chains and supermarkets, have decided to go cashless and only accept card and online payments. This change is said to be temporary, but it is highly likely to be adopted permanently when the pandemic is finally over.
Plans to introduce the digital dollar, which up until now have been just a dream of forwarding-thinkers, featured on a recent draft of the economic stimulus bill before they were removed from the final version. The digital dollar would have revolutionized the U.S financial and banking sector, fundamentally changing the economy as we know it.
In Europe, France is already making plans to introduce the digital euro in its economy.
The monetary and economic challenges experienced in recent weeks have pushed some to invest in digital assets like bitcoin, and this has further convinced those who support these assets that they are the future of the money.
How Coronavirus Crisis Has Changed Payments & Banking Behaviours
Cash withdrawals from ATMs at the start of the year were already well below those of similar period in 2019 and 2018, showing a gradual but steady reduction in the use of paper currency.
Finance Analysts at Credit Capital say, “the Coronavirus pandemic has altered the way people make payments, do their banking, socialise, shop and work. While some people were already using digital currencies in their day-to-day lives, others are just starting to learn about them. They add, “as COVID-19 continues, people need to realise the long-term effects of these changes and decide the best possible way to make financial transactions in this fast-changing world.”
A FIS study involving over 1,000 consumers in the U.S conducted between April 3 and April 5 found out that the coronavirus crisis has increased the rate at which people are moving to digital forms of commerce, payments, and banking. The survey suggested that there will be a "new normal" in consumer behaviour after the pandemic is put under control.
Some specific findings of the above study include;
- Over 45% of participants said that they have permanently changed how they do their banking since the outbreak of COVID-19.
- Over 30% of participants said they will use mobile or internet banking more in the future.
- Over 45% of respondents said that they had used a mobile wallet payment system in the last month.
- The study found that there will be a significant shift from cash to checks in the future.
- Over 40% of respondents said they will shop online more.
"The effects of the coronavirus pandemic have greatly accelerated behavioural changes that we have been observing about digital payments and banking," noted Vladic Mladen, GM, FIS. "Once people start using new and innovative digital payment platforms, few will opt to go back to their old habits, so we expect there will be a 'new normal' in the coming months."
Day-to-Day Banking Has Changed
Considering the combination of lockdowns, working from home, and most bank branches and banking lobbies being shut down, many consumers have had to look for other ways to manage their cash other than physically going to the bank. FIS notes that 45% of the participants in their study said that COVID-19 has permanently changed the way they do banking.
Some people have shifted from banking halls and lobbies to drive-thru lanes, while some have opted to use their bank's call centre facilities. Others have increased their use of mobile and online banking.
While many studies on consumer behaviour tend to exaggerate the permanence of the changes they observe, the number of people saying that they have changed how they view and manage money has gone up every week since the outbreak began. For these changes to become permanent, financial institutions will need to back the transition to digital currencies and payment solutions.
This includes facilitating online account opening and promoting online customer relations during service delivery. It requires a complete overhaul of mobile and online banking applications with a focus on user experience including the eradication of obstacles emanating from the office paperwork.
Digital Payments Get A Boost From COVID-19
Before the coronavirus pandemic, the transition to digital payments from checks and cash had been gradual, but unsupported. COVID-19 has increased the rate of this change in payment habits. Currently, consumers are buying most of their products online. This has significantly increased the use of digital payment platforms and decreased check, cash, and POS usage. L payment mobile wallets and contactless payments) or using contaminated cash. Even though scientists have not established that using paper currency can increase your risk of getting the virus, consumers are still wary of using cash and this is causing them to shift to cashless and
touchless payments.
Use of mobile wallet has also seen an increase due to the coronavirus pandemic. FIS notes that 51% of respondents in their study had used PayPal in the last 30 days. Surprisingly, the lowest use was among the youngest respondents in the study. In the same period, 28% of respondent said they used Venmo (popular with the younger demographic), with 16% using Zelle and 20%
using Apple Pay.
Many businesses are also shifting to digital payments as well.
Embrance Change and Disrupt the Status Quo
The change to online banking and payment has disrupted many industries. Consumers have now begun embracing new and innovative ways of managing their money and making
payments. It is highly likely that consumers will not shift back to their old habits of primarily using cash and visiting bank branches.
This is the opportune time for financial institutions to partner with fitness firms, encourage digital payments, leverage new technologies, down down on digital banking, and reduce physical branch networks to align with the ongoing consumer behaviour change.
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