This article was originally published in the Economic Times
About Author: Yogesh Sangle is the Global Head of Consumer and SME Business at Nium, a fast-growing financial technology platform that is redefining the way consumers and businesses send, spend and receive funds across borders.
Social distancing has become the new norm in the wake of COVID-19. And while the pandemic has had a negative effect on markets and businesses globally, it is also acting as a catalyst for a digital transformation. The US and parts of Europe have long been in favour of cash payments over digital transactions. But with governments implementing lockdowns and organisations switching to remote working, these trends are seeing a dramatic shift. Despite a dip in traditional remittances, according to McKinsey contactless transactions are growing like never before. An example can be seen in PayPal’s latest report about the company processing the largest amount of transactions in the history of their company on 1 May 2020, far exceeding that of Cyber Monday and Black Friday. This is possibly because they are perceived as a more hygienic alternative to handling cash. World over, the opinion is divided on whether this is an aberration or the cusp of a paradigm shift; however, if the evolution of remittance methods in Asia is anything to go by, we can safely assume that the future of payments is digital, and the West is going to have to catch up.
The transition towards digital payments began in Asian countries much before the onset of the pandemic. While the USA still has a good proportion of users using cashier checks currently, South Korea eliminated checks almost a decade ago. Internet users in China using online payment services rose from 18% in 2008 to 73% in 2018. In a recent report, Deutsche Bank found that emerging economies embraced mobile payment networks before the developed world did- Alipay began in 2004, a full decade before the launch of Apple Pay in 2014. In China the most preferred method of payment is via e-wallets such as WeChat Pay or Alipay. Cash is hardly being used within the country. It may be the lack or unavailability of physical banking services in developing countries, coupled with high penetration of mobile phones, that has pushed them to explore the digital route.
The circumstances triggered by COVID-19 are now compelling Europe and the US to accelerate their shift towards digitisation. As the distribution of cash faces disruption, cost-effective and convenient alternatives such as digital wallets promise to pave the way to mitigate the impact of the crisis and address specific business challenges. Now is the time for countries across the globe to usher in a new era; to digitise commerce in a way that is inclusive even towards the unbanked segments of the economy. Smaller retailers who have been forced to shut shop may not be able to reopen physically, but can hope for a digital future instead. Chinese banks are already setting up simple e-commerce platforms with easy-to-use payment options to help their small-merchant client base to sustain. Banks in Italy, too, are in the midst of launching similar initiatives and the rest of the world is sure to join this movement soon.
As the payments landscape continues to change, the introduction of new digital financial tools are redefining the way consumers and businesses send, spend and receive funds, not just by simplifying transactions, but also by enabling businesses to optimise their cross-border payments through multi-currency, multi wallet payment options.
An unprecedented crisis such as the ongoing pandemic calls for path breaking solutions. As the global economy contemplates the possibility of a cashless future, new fintech tools aspire to free businesses and partners of old constraints and build upon a world of open money.
Read the original article here