COVID-19 has accelerated innovation in payments – but how?

29 September 2020

COVID-19 has been a major stress test for digital transformation. Merchants have had to ramp up their e-commerce, delivery and card-not-present capabilities. As COVID-19 continues to take its toll, players in the payments market will need to continue to innovate to meet their customer needs.

Fortunately, the industry is rising to the challenge, and has myriad technical innovations and assets to enable this shift in consumer behaviour. Let’s take a look at some of the ways in which businesses have changed the way they operate and what new payment solutions have been developed as a result of COVID-19.

Simplifying Payments for Consumers

Making and receiving payments has become critical during the pandemic. As time spent under lock-down increased, consumers relied more on digital payments than ever. As a result, banks and technology providers are optimising their customers’ ability to access cash and make payments.

Take obtaining food and other essential supplies when self-isolating, for example. In response to this challenge, Starling Bank’s personal account customers who need support with their shopping can request a second card connected to their account via their banking app. This connected debit card can be given to someone you trust so they can buy groceries and other essentials. Since the connected card has a separate PIN and can be used for contactless payments, money can be spent on a person’s behalf without the need to exchange cash or bank details.

In the US, a market notoriously slow to adopt digital payments technology, Walmart is expanding the ways in which it provides contactless services. The retailer is now offering contactless payments for consumers who use its mobile apps at store check-outs. While consumers previously had to select a payment method by touching a screen on the self-checkouts, they can now scan a QR code using their smartphones, which Walmart Pay app will then sync and secure to enable a contact-free transaction.

In sub-Saharan Africa, payment organisations are forming partnerships with other industries to further enable digital payments. Safaricom in Kenya, for example, has partnered with the National Social Security Fund to enable customers to make rent and service-charge payments through their M-Pesa accounts. In addition, Safaricom is partnering with public-sector transport players to accept payments through M-Pesa accounts and has been deployed to more than 300 City Star Shuttle buses in Nairobi.

Making Payments Invisible

To increase sales and reduce contact during the crisis, a new payment service is being launched in Hungary by Cellum, a multinational mobile wallet provider, in conjunction with Mastercard and Festipay, an integrated event management solutions provider. This new service will allow any smartphone with 4G connectivity to become a POS terminal, enabling myriad payment possibilities and providing a low-cost method for small business to accept card-based payments.

Meanwhile, in the UK, supermarket Asda rolled out its Scan & Go Mobile programme to 200 additional stores in a bid to reduce contact with checkout staff, meaning that the technology is now available at all 581 Asda stores across the UK. Shoppers can use either a special handset or a dedicated app on their phone to scan goods, and the app or handset will also display a running total cost of the goods scanned – helping customers shop at a distance.

Previously underused in Europe and North America, QR codes are also experiencing somewhat of a resurgence. In the United States, PayPal has partnered with digital wallet Venmo to roll out a QR code payment technology across all 8,200 CVS Pharmacy stores in the country, as part of a multi-year agreement between PayPal and payment solutions provider InComm. Venmo has also launched a new feature called Business Profiles that allows small businesses to accept payments via a QR code, track business transactions and access customer analytics.

In Spain, CaixaBank is supporting small retail businesses with the launch of Social Commerce where businesses can manage online purchases directly via social networks and messaging applications. The solution enables retailers to sell through their profiles on Facebook, Twitter, Instagram, WhatsApp, or any other means of communication with the end customer, without the need to have an online store or their own website. CaixaBank has also implemented PayGold, a solution designed to receive payments online, by email or SMS, without the need for the business to have its own website. The product is available to CaixaBank’s retail business customers as well as new business customers.

Streamlining Government and Business Payments

Australia, who has recently been at the vanguard of payments infrastructure innovation, is again leading the way. Its real-time payments system, the New Payments Platform (NPP) is the cornerstone of the country’s COVID-19 payments. In March 2020, the Department of Finance implemented Project NeRF, focused on using the Australian real-time payments system (NPP) to modernise Commonwealth cash management. The project was delivered in partnership with the Reserve Bank of Australia (RBA) and Authorised Deposit-taking Institutions (ADIs) from the banking sector. These agencies, including those involved in the COVID-19 crisis, are now able to better respond to emergencies with the ability to access urgent funding during business hours or on weekends in real-time.

As Australian businesses battle the challenges presented by the COVID-19 crisis, many are also advertising PayID as a payment alternative to cash. This is particularly the case for those who rely on cash on demand and have had to ‘pivot’ quickly to keep operating, such as cafes, mobile dog grooming services and hairdressers. PayID enables real-time payments into a bank account using a simple identifier, like a phone number or email address, instead of traditional account number and other bank identifiers. There are now more than 4.6 million PayIDs registered in Australia, and this number has grown by 20% since the beginning of the year.

In parts of Africa, we have seen an increase in the use of digital-payment platforms by governments to disseminate stimulus funds and mitigate the economic impact of the COVID-19 crisis while deepening financial inclusion outside the traditional bank establishment. For example, the government in Togo launched Novissi, a cash transfer program that disburses social welfare payments through mobile channels. Local governments in China are also using methods such as prepaid vouchers and coupons to encourage consumer spending via mobile payment platforms like Alipay and WeChat Pay. Jiaxing city in the Zhengjiang province announced that it would issue 200 million yuan (US$28.2 million) worth of digital consumer coupons to the public, of which 150 million yuan could be redeemed through WeChat Pay.

Meanwhile, in Europe, UK supermarket chain Morrisons is exploiting the nation’s Faster Payments system by committing to 48-hour payments in order to help smaller suppliers during the crisis. Morrisons works with around 3,000 small suppliers including 1,750 farmers that will benefit from this commitment. Prior to this change, its smallest food manufacturers were on 14-day payment terms.

Creation of an innovation mushroom

These are just a few examples of the industry adapting to the rapid requirements for digital payment solutions. While these solutions have not been elaborate or expensive to deliver (speed has been of the essence), there is little doubt that payment systems have entered a new phase of digital innovation and are far from becoming obsolete. In fact, they are blooming. We will continue to see an innovation mushroom over the coming months, with the transition to digital payments becoming a priority for many businesses around the world. While we don’t know for sure that these new payments habits will persist post-pandemic, it is all to play for. However the story unfolds, there is no doubt that the industry has seen so much collaboration for the public good during this period. And long may it continue.

Lauren Jones