Life in 2022: How a global pandemic changed payments

By James Booth, VP Head of Partnerships, EMEA at PPRO 

It’s January 2022. Countries around the world are teeming with life again. Roads and trains are packed with employees commuting to work. High street retailers are seeing foot traffic, and restaurants are gearing up for flocks of hungry patrons. After a continued global effort to flatten the curve and months of social distancing, COVID-19 is finally in the rear-view. People around the world are relieved to be back to life as it was, but will things ever truly be the same?

COVID-19 shook the global economy as the largest pandemic since the Spanish flu in the early 20th century. Social distancing drastically shifted consumer behaviour and introduced a new set of challenges to stores and shoppers alike. But, as humanity has always done, we came together, adapted, and innovated.

We’ve entered a more stable 2022, adjusted to a new normal, and now we’re pausing to reflect on what we’ve just overcome. Let’s take a closer look at how payments and global commerce have changed in the last 18 months.

Monumental (and Permanent) Changes in Shopping Habits

COVID-19 was a major accelerator in the shift to digital for most of us; how we take classes, do our jobs, connect with friends, and definitely how we shop. Online shopping had already been the norm with Gen Z and Millennials, but COVID-19 served as the inflection point for older demographics and slow adopters. Gen X and Baby Boomers are often reluctant to change their habits, but 2020 disrupted the status quo for nearly all aspects of life. Throughout 2020, discretionary spending dropped due to a surge in unemployment rates, but e-commerce is now enjoying an all-time high thanks to its inherent convenience.

COVID-19 revealed a structural problem in our reliance on big-box retailers. At first, consumers suffered shortages of goods and frustrating checkout experiences, but big businesses responded with unprecedented agility. They quickly made improvements to overcome the new challenges of the market. Because of social distancing, many brick-and-mortar retailers were forced to go online for the first time. This was enabled by various e-commerce plug-and-play platforms that allowed small retailers or sole traders to sell online in a matter of days.

The market became a cornucopia of choice for the consumer. Millions of people who had previously resisted e-commerce – particularly for fast-moving consumer goods such as groceries – signed up with e-commerce sites. Post-pandemic, few of us have gone back to old shopping habits.

A Flood of Fierce Competition

The rapid, sustained increase in online shopping created an interesting challenge for merchants. More consumers meant higher earning potential, but it also meant more competition in the marketplace. To stand out, merchants are applying new rigor and attention to customer and user experience. Brick-and-mortar stores have largely become showrooms or click-and-collect points. Retailers have invested in connecting digital experiences to the physical using robust augmented or virtual reality and immersive experiences.

As a result of the increased quality in the market, consumers (who were already insisting on intuitive user journeys pre-pandemic) now have zero tolerance for sites that are not at least easy to use. When it comes to that all-important payment experience – the make or break moment of conversion – it’s critical to have checkout flows that feel invisible for digital natives, yet inspire trust for those late-adopters.

Local Payment Methods Continue to Drive ‘Glocalization’

In 2020, COVID-19 drove consumers to look outside their immediate geography for goods and services. Major drivers of this included price point, quality of products, and availability due to global supply chain challenges. The opportunity for merchants to sell across their borders became even greater, and acted as a solution to bridge revenue gaps and increase reach to an entirely new, global audience. Now, in 2022, most large and medium-sized retailers are selling across borders.

While it’s become easy to navigate logistics around the world, collecting funds in other markets is still an entirely different story. Like all aspects of culture, payment preferences vary from country to country. Surprising to Americans and Brits is that not all e-commerce is paid for with big brand credit cards. In fact, over 70% of global e-commerce is powered by over 450 local payment methods (which is why the misnomer ‘alternative’ has swapped for ‘local’ in recent years). Indeed, e-wallets like Alipay, WeChat Pay, and GrabPay dominate payments in Asia – now more than ever.

Offering local payment methods (LPMs) has always been a critical part of boosting conversion across borders. During the pandemic, as consumers clung more tightly to their money, the demand for payment methods that were familiar and trusted only increased.

How the Local Payments Landscape Changed During COVID-19

The payment needs and preferences of global consumers still vary from country to country. In fact, they are more diverse than ever. Still, a global trend has been the accelerated shift from traditional cash and card payments toward digital payment methods at the point of sale. Out of social distancing necessity, the pandemic led to increased use of contactless, digital payment methods like mobile e-wallets, bank transfers, and QR codes. Many retailers, particularly in the US, who have long resisted installing contactless technology due to processing fees have now been compelled to offer it.

When it comes to shopping online, installment payment methods like Klarna and Afterpay have surged in use, as they enabled shoppers suffering from the economic impacts of COVID-19 to defer payments and still buy what they wanted. Before the pandemic, apps like these were primarily used by younger demographics to break up payments on big-ticket items, luxury goods, and travel. Many consumers now prefer a ‘buy now, pay later’ option.

During the pandemic, cash obviously circulated less as brick-and-mortar retailers closed or implemented digital payment methods to avoid contact. In 2022, the markets that have remained predominantly digital are markets that had low cash use before the pandemic: the US, UK, Western Europe, and large parts of Asia. Cash-based payment methods remain popular for some economies around the world (especially places in Latin America, where there are high percentages of unbanked consumers). But make no mistake: We are closer to a completely cashless society in 2022 than we have ever been.

Innovation in a Time of Crisis

Even before 2020, the proliferation of local payment methods was only set to increase. Now, in a world that faced a pandemic that made e-commerce a necessity, we’ve seen an explosion of new fintechs, local payment methods, and product functionalities. Legacy providers struggle to keep up as new players create integrated, easier-to-use, and more secure options for consumers.

But while there’s more competition than ever, there’s also a new spirit of cooperation and collaboration. Rivals have joined forces to innovate for global consumers. COVID-19 incentivized businesses to provide simple solutions for people stressed by a pandemic. ‘Coopetition’ fueled complex advancements in payments tech.

Despite the havoc wreaked on the global economy, it’s come out stronger than before. In 2022, e-commerce continues to be a powerful force for good. Many consumers have new ways to shop, and retailers now have access to larger, global audiences. Small merchants have a bigger share of the local market and are now able to compete on the same level as big-box retailers.

Before COVID-19 upturned life as we knew it, 2020 sounded so futuristic; there were endless thought pieces in January 2020 on how the internet and AI were taking over. But, as it turned out, technology has become one of humanity’s greatest gifts, enabling us to connect, keep working, and get access to the goods and services we need.