‘Essential Digitization’ in Payments Is Accelerating at an Incredible Velocity as a Result of the COVID-19 Pandemic
As lockdown restrictions ease across the world, we are now entering what can only be described as a ‘new normal’, characterized by social distancing and the wearing of masks in most public places. Nonetheless, COVID-19 has had massive effects on the world’s economy, leading to a drastic drop in spending and changing the way consumers pay for goods and services. We can see the immediate impact on businesses today, particularly in commerce where there has been a rise in contactless transactions and companies undergoing rapid digital transformation or promoting new technologies to ensure a safe and secure check-out.
It is important to note that not everyone in society will be willing or able to embrace this digitization. However, we expect that the global proportion of people who are digitally-resistant and digitally-reluctant will have decreased. Many have adapted out of necessity, and many have been supported to make the digital transition. For example, in some regions people from low income groups of the economy have been provided with free computers; similarly, younger generations have helped educate older members of their families to help them understand how to access and utilize the power of technology.
However, a significant number are still left behind, not able to afford or use digital solutions. As more services are digitized, there is a danger that, although fewer people will be accessing non-digital services, those who rely on them will find themselves even more alienated and excluded than they have been in the past.
Accelerated adoption of technologies by merchants
In general the coronavirus pandemic is not leading to the development of new technologies; rather we are seeing a much faster and more widespread adoption of those that already existed. In other words, certain technologies are seeing increased relevance due to the effects of the pandemic, and this trend will last beyond the current period of the crisis.
In general, the use cases for existing technologies that we think will witness an acceleration in relevance fall into one of two categories:
In the first category, are those technologies that directly address the needs of the ‘new normal’. These include digital currencies, digital contracts, mobile solutions, 3D printing, Augmented Reality and Virtual Reality (AR/VR), and communication tools to support remote working and collaboration. In terms of payments, we see the Internet of Things (IoT) as an enabler of autonomous zero-contract payments and as an enabler for the pay-as-you-use charging models which we expect will have a higher demand post-crisis. Methods of authentication that do not require any physical contact such as NFC, voice, iris or facial recognition will also become more valuable.
In the second category, are those technologies that enable business resilience through agility. They include Cloud and micro services, Big Data, API first architectures, chatbots and voicebots, and communication infrastructure that meets the connectivity requirements for increased secure online transactions.
What’s next for businesses?
After this crisis, we believe there will be two long-lasting impacts for businesses:
Firstly, investors will value and executives will try to build, companies that can be resilient, even in the face of unpredictable and far reaching global events. To achieve this resilience, organisations will need to be able to adapt in a rapid and agile way to unforeseen circumstances. This will force them to re-evaluate their supply chains and their attitude to cost management.
Secondly, there will be a lasting impact on where and how people work, something we characterize as a shift from teleworking to smart working. Savvy organisations will recognise that working remotely has increased the amount of autonomy people have in their work and the way they are managed: rather than judging people by whether or not they turn up for work, they are being measured on the results they deliver (not by how they achieve them). We do not expect the world will return to how things were before the crisis. Merchants who have adapted out of necessity during the crisis, will now be seeking to prepare for the lasting impacts that we have described, and planning the next steps for how they can harness technologies in new and valuable ways in the post-COVID-19 world.
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