The pandemic accelerates the use of cards and the adoption of financial services
Covid-19 has had several short- and long-term impacts on the payments industry, providing opportunities and challenges
Source: Kendrick Sands, Euromonitor International
Longer-term effects include an accelerated payment value of mobile commerce (an additional USD 3.8 trillion increase in the payment value of mobile commerce is expected by 2026), increased adoption of financial services and rapid growth of contactless payments. The overall decline in consumer payment value, increases in the portion of consumer credit that is deemed unprofitable, and the shift to payment card features are now examples of the short-term effects of the pandemic. These impacts were felt to varying degrees by country, but were experienced in both developed and developing markets.
Consumers embrace cash alternatives
Online retail migration accelerated rapidly during the pandemic and this trend is expected to continue. The trend was certainly underway before the emergence of COVID-19, but consumers who had been locked up were limited in terms of how to buy goods. This is a long-term development because it has converted consumers who were hesitant to use cash alternatives and increased card acceptance at merchants who previously did not accept financial cards for payments.
The share of mobile commerce that was proximity at the point of sale (POS) also increased to 41% globally in 2021, a significant increase from the 10% seen over the previous five years. Proximity payments with mobile devices or contactless smart cards were struggling to gain ground among consumers and merchants. The need to reduce friction at the point of sale proved the use case for the technology and will likely continue to be a component of in-store payments in the future. 92% of financial cards were smart cards in the US in 2021, up from 64% in 2016.
Finally, the number of unbanked consumers aged 15 and over in the 47 markets surveyed by Euromonitor International has fallen by 137 million since the start of the pandemic in 2019. Access to financial products and services has increased with the wider adoption of mobile devices around the world. . Digital-only banks can offer financial products and services at a lower cost or free, and they are simpler and more transparent. Most of the recently banked were in Asia Pacific, where digital payment platforms offer financial products to facilitate commerce. Driving financial products broadens the potential customer base for your core product or service.
Temporary decline in consumer spending
Consumer spending recovered in 2021 after a marginal decline between 2019 and 2020. Within financial cards, the growth of the debit payment value remained positive, while the credit payment value experienced a decline between 2019 and 2020. The rapid return to growth is due in large part to consumers regaining confidence in the economy. future because vaccines to control the spread of the virus are increasingly available. With an increasing number of consumers adopting financial products and services during the forecast period, the value of the debit payment is expected to maintain higher growth compared to the credit.
The impact of the pandemic on consumer payments will persist for years to come in the form of increasing the value of mobile commerce, greater access and adoption of cards and financial services, and greater adoption of contactless payments via smart cards or devices. mobiles. In the short term, while the non-performing consumer credit rate increased, it is expected to decline during the forecast period. The total value of consumer payments has recovered and is expected to continue to grow. The value of consumer credit payments has also recovered and is forecast to show steady growth over the forecast period. The value of non-performing consumer credit increased 15% from 2019 to 2020 and 11% from 2020 to 2021 . The steady increase could be the result of financial institutions offering payment relief during the pandemic. In the previous recession, the non-performing loan rate skyrocketed 32% between 2008 and 2009, but steadily declined in subsequent years.