Why Covid-19 is accelerating the adoption of emerging payments

By Chris Ford, Senior Director, Blackhawk Network  

Over the last five years, the payments sector has undergone dramatic change. From small cafés going cashless, to people being more confident to transact online and onto a huge rise in the use of mobile phones and smart devices as payment methods.

Research from Hootsuite found that in Q1 of this year, digital/mobile wallets were the single most popular payment method for consumers shopping online (42%). The payments industry is already fast-paced, but it is undeniable that the effects of Covid-19 are propelling it even further forward. In response to health recommendations, we are seeing more and more business adopt a cashless approach to payments.

We’ve taken a closer look at how Covid-19 is accelerating the adoption of emerging payments, and why this technology will continue to evolve after the crisis. After all, meeting the needs and expectations of customers in their new normal will set brands up for their continued future success.

Why Covid-19 is accelerating the adoption of emerging payments

The need to avoid physical contact amid Covid-19 has meant that business small and large have had to adapt, switching to cashless payment methods overnight.

Propelled by lockdown, demand for alternative payment methods is greater than ever, so payment solutions such as e-code vouchers and gift cards have grown in prominence. On the first of April, the maximum spend for contactless payment was increased by £15, to £45, making it easier to shop safely in grocery and essential retail stores. This came as a direct response to the evolving needs of consumers.

Whilst many retailers have experienced declines in sales due to closures, the grocery industry is one which has seen an increase in demand and spend. A recent study found that 32 percent of people surveyed have had to splash out more on groceries as a result of no longer eating out. For some families, being at home for three meals a day is causing financial strain, leading to food poverty. The UK government has reacted by providing access to supermarket vouchers for those who ordinarily rely on free school meals.

Emerging payment technology will continue to evolve after the crisis 

The latest advice from the Government states that local lockdown measures will be implemented as necessary to subdue flare-ups of the virus in concentrated areas. For business owners as well as the general public, this means that everyday life as we once knew it may be slow to return. Some lockdown measures may even continue into the long-term, so emerging payments will be the new norm for many people going forwards. Technology will need to continue progressing and innovating in a way that supersedes short-term trends and fads.

According to Philippa Lally, a health psychology researcher at University College London, it takes an average of 66 days to inform new habits. Lockdown measures in the UK have already exceeded this window of time, so the new payment habits that have now formed are highly likely to stick.

What gift cards and virtual payments are doing to engage customers

While measures have been put in place to reduce the risk of infection, for those people self-isolating and shielding, emerging payment solutions have provided a lifeline. NatWest has introduced companion cards, whereby family members, friends or carers can pay for food shopping and essentials without the risk of handing over a current account debit card. The card is available as an addition to existing current accounts and can be topped up with a limit of £100 every five days.

In Ireland, FBD and Zurich insurance companies have pledged rebates to certain motor insurance customers, offering a €35 One4all gift card. This is a prime example of a business using emerging payments to engage customers whilst they aren’t able to use their cars as much and ahead of the expected reduction in claims as fewer cars are on the roads.

Digital gift cards and virtual prepaid cards are two examples of how businesses can transfer funds to customers yet maintain ultimate choice and flexibility. Wherever a BACS transfer, cheque payment or bill credit is typically offered, brands are outsourcing this requirement to specialist companies that can deliver true cash alternatives without processing costs. Where companies are maintaining engagement with their workforce remotely, recognising and rewarding efforts or simply funding their new work from home environment, choice based alternative payments are providing a pivotal link to recipients.  Where people in need require support, it’s alternative payment providers that are bridging the gap and supporting the requirements.

Ultimately, the best use cases of emerging payments are where they build connections between people and brands. Businesses that recognise the value of both accepting and processing payments through innovative emerging technologies will lead the way in the years to come, as we navigate a post Covid-19 world.