By Kunal Sawhney, CEO, Kalkine Group
The Covid-19 pandemic has been destructive and transformative in multiple manners, following which the countries, central banks, businesses, localised vendors, as well as individuals were forced to undergo a series of changes to combat the never-seen-before repercussions of the deadliest virus of modern history.
A large section of people is now quite familiarised with the restrictive operating environment as the scale and nature of Covid-19 (SARS CoV-2) unfolds, while the remaining individuals are learning to adapt to the altogether new changes with regard to the periodic activities including shopping, holidaying, travelling, purchasing household stuff, and other over-the-counter (OTC) payments.
Payments during the Pandemic go Contactless
As far as the payments in the pandemic era are concerned, a gradual increase in contactless transfers has been recorded as people remained reluctant in using cash and other tokenised forms of money as it possesses a fair likelihood of virus transmission.
Alongside the new pandemic-induced guidelines, including social distancing, compulsory usage of face masks, work from home, and sanitisation, contactless payments are becoming the new normal. Even the senior citizens and people falling in the super senior categories are learning to use the contactless payment system, primarily because of its ease and no-touch payment facilities.
Contactless payment systems based on radio frequency identification (RFID) or near-field communication (NFC) have seen widespread growth, especially after the contagion effects of coronavirus pandemic began to emerge. Mastercard and Visa have spearheaded the transformation of contactless payments through debit and credit cards. But the proportionate usage of contactless systems has been relatively less even with the higher penetration of point of sale (PoS) machines.
The unusual surge in the volume of cashless payments is quite evident due to the presence of Covid curbs and unending fears of contracting the infection. The newer technologies and IT-enabled infrastructure has substantially helped in the expeditious transformation to cashless payments, with a considerable number of countries witnessing sharp spikes.
The coronavirus pandemic has fundamentally changed the behaviour of individuals when it comes to settling a transaction. According to a survey conducted by the Brookfield-headquartered fintech major Fiserv, more than one in every four consumers in the United States shifted to cashless payment options due to the uncontrollable emergence of coronavirus.
Cash-based payments, used to bear the major portion of transactions, reduced sharply with the increasing usage of online modes of payments and contactless payment systems. The periodic requirements of several essential, as well as some of the non-essential products and services, have helped in spiralling the number of contactless payments. The mandated guidelines of social distancing, staying at home, and restricted travel, particularly for the people residing in the containment zones and highly-infected localities, have furthered the usage of cashless payments.
The global transaction data and consumer research done by Mastercard across 19 countries indicated that the contactless card payments increased by 25 per cent on-year as a proportion of total face-to-face card payments. Around 79 per cent of people across the globe and 91 per cent individuals belonging to the Asia Pacific region have cited cleanliness and safety as the foremost reasons to shift to tap-and-go payments, the New York-based financial corporation said.
Banking Sector push for Financial Innovations in Payments during Covid-19
It seems quite obvious that the physical modes of exchanging money develops a potential case of virus transmission through the currency notes and coins as there is no mechanism to check the presence of virus strains on a real-time basis. The way of handling the cash in pockets, wallets, dashboards of merchants, and the small depositories held by the local vendors are not so adequate in terms of cleanliness and hygiene.
The adoption of contactless modes of payments has been gathering pace over the years but at a slower-than-expected rate. The restrictive operating instructions during the pandemic era and the hardships of lockdown, controlled travel, limited opening hours of shopping windows and moderated number of leisure activities have collectively catalysed the adoption of contactless payments across the world.
The technological advancements and breakthrough in developing new-age systems for enabling cashless payment systems has been driving up the behavioural shift of consumers. The central banks that used to stay resilient with a higher quantum contactless payment are seemingly allowing them by introducing a pin. With this functionality, a consumer can easily tap a credit or debit card at the PoS machine and have the option to either enter the PIN by himself or tell the merchant to enter the same.
Consumers embrace contactless methods of payments to stay safe during Pandemic
The governments and the central monetary authorities are continuously endorsing contactless payments with an objective to limit the usage of cash. The apparent objective has now been solidified by the catastrophic impact of coronavirus, as with cashless payments people will be at less risk of contracting the virus as relatively compared to the conventional scan and pin methods.
The usage of tap-and-go credit and debit cards has been already at a growing stage, even before the pandemic struck. Notably, less consumption of time and safety drove up the volumes of cashless payments done through cards, while the settlements done via mobile payment facilities with the help of NFC ranks after contactless card payments in terms of time consumed and safety.
Interestingly, the contactless payments done via credit and debit cards have managed to achieve the first position, with 42 per cent of the individuals quizzed, supporting the mechanism when Fiserv quizzed the people about the safest payment mode to prevent Covid-19.
Multiple surveys conducted by various research organisations have indicated a similar pattern and people’s perception towards contactless card payments. Forgetting the Covid-19 for a moment, we are well familiar with the fact that all the publicly-shared devices, including the ATMs, PoS machines, cash deposit kiosks, exceptionally have a high presence of bacteria and viruses.
What’s next for contactless payments?
The incorporation of non-conventional methodologies of transactions, payments and settlements is poised to grow in the upcoming years, witnessing the severity of coronavirus across the world as it would certainly take more than a couple of years to fully recover from the pandemic-laden gaps in the livelihood and the economic cycle.
The contactless mode of payments offers a bouquet of benefits as with reduced payment times, the merchants can effectively decrease the likelihood of long queues at the checkout counters and can obviously help in minimising the risk of Covid spread as the individuals will not be required to gather in large numbers while clearing their respective bills.
It has been quite noticeable that most of the supermarkets and other megastores encounter the difficulty of the bottleneck at the checkout counters unless an operator has instituted adequately enough counters for clearing the bill. Notably, there seems ample space in the store, but most of the supermarket operators usually cut-short the number of checkout counters in order to reduce the deployment of staff and increase the effective space of the store so that more items can be accommodated.
With the growth in contactless payments, every party involved throughout the transaction enjoys a win-win situation as the bank or the financial institution issuing the credit or debit card will certainly have less number of requests for card replacements due to breakage or minor cracks, the merchant acting as the selling can enable faster payments, thereby reducing the time utilised to process the transaction, and at the end the, customer at the other end can stay rest assured of the safety, timeliness, and cleanliness.
Before the emergence of pandemic and large-scale eruption of Covid cases, there has been a considerable number of people who haven’t used the contactless payment facility majorly due to busy schedules, tight deadlines and moderately high requirement of travel for official, as well as non-official purposes. The repeated lockdowns have undoubtedly developed grave financial as well as emotional hurdles for humans.
On the other hand, the restrictions imposed by the regional authorities and central governments as a part of lockdown have undeniably helped us to explore more avenues that are more promising on the safety barometer. The erstwhile non-compliant behaviour of people has remained subdued in a considerable manner as individuals got the opportunity to utilise the technology for the greater good of themselves, as well as their families.
It’s not only about the contactless payments through cards, but the coronavirus also-led national lockdowns and tightened restrictions have paved the way for more transformational technologies in the space of payments, peer-to-peer transfers, and the settlement of bills. The central banks across the world, including the Bank of England have been delinquently working to introduce the central bank digital currencies (CBDC).
It wouldn’t be too far when the individuals will be able to settle their transactions without producing a card at the merchant’s counter. Supported by the breakthrough development of information technology and its extensive applications in the financial and transactional area, the innovations in the contactless payments landscape are here to stay as people are looking forward to newer and more safer means for paying their bills.
As of now, a huge proportion of people will stay unwilling and resistant to use the cash-based payment options even after when the Covid-19 becomes a decade-old pandemic. Covid-19 like a grey swan event, has battered the sentiments, so much so, that individuals are looking for comprehensive, complete, error-free, risk-free, and faster solutions, especially when it comes to handling the monetary issues, be it with a bank or a merchant or a localised dealer.
This is a Contributed Article