How COVID-19 Altered Payment Systems Altogether

Though there is sufficient evidence indicating that the COVID-19 virus transmission is not happening via currency, still there is a lot of apprehension amongst people to use cash. The pandemic has surely altered the way at which cash is being used across the world. The pandemic has undoubtedly accelerated the digital payment trend worldwide, and digitalised payments is an alteration here to stay.

With the pandemic, there has been a drastic increase in mobile phones usage and contactless cards to make payments. As contactless payments can be made easily and quickly, they have become popular in the last few years and especially in 2020 due to the pandemic. In the first quarter of 2020, there was a 40% increase in contactless card transactions globally.

Let’s look at how COVID-19 impacted payments industry altogether:

• With the onset of the pandemic, consumer spending took a big hit, which impacted the major payments revenue streams.
• Initially, cash withdrawals witnessed a spike but significantly declined with time.
• Payments providers started to introduce initiatives to preserve economic liquidity.
• Tokenized and embedded payments began gaining popularity.
• Businesses and consumers are getting attracted towards payment experiences which offer more control.

Despite the increasing number of people opting for contactless payments, a few sections of the society are still banking on cash for their daily transactions. This includes the elderly in rural areas, also people who get paid in the form of cash, for example, the waiters. The next objective is to get these people ready for the transition from cash to digitalised payments. The ultimate goal has to be to include everyone under the ambit of the digital economy.

2020 has proven that instant payments and immediate access to cash have become necessary and not an option anymore. A complete transition to a cashless economy might take more time than we actually think.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in