The potential impact of the Covid-19 is becoming more evident and trickling down the major sectors of the global economy including manufacturing, auto, retail, aviation and hospitality.
To cope with the effect of the Covid-19 spread, many countries like India are taking several precautions such as nationwide lockdown, shutting down transport & public places, limiting people’s movement, and maintaining social distance.
With the growth of the Covid-19 outbreak, the fastly growing digital payment sector is expected to be severely hit.
The decline of digital payment systems is seen in all major industries such as airlines, tourism, entertainment, hotel, restaurants, and a variety of other sectors. Further, international payments, whether B2B or C2B, have significantly declined as a result of temporary border shut down.
However, some areas have seen an upsurge in digital payments during the time of Covid-19. These areas include OTT platforms i.e. Netflix, Amazon Prime, online grocery shopping, online pharmacy, online gaming, online recharge & utility bill payment, and online education.
Digital payment volume records a significant growth as government bodies are promoting the importance and convenience of digital payment. Digital payment once was a thing of convenience which is now becoming a necessary thing. The majority of the sectors are expected to contribute to the growth of digital payment systems, so it is too early to ascertain the impact of the Covid-19 spread on the digital payment system.
Here in today’s informative blog post, we will try to discuss the impact of the Covid-19 outbreak on the digital payment system in great detail & how payment gateway script can help you in expending your business reach.
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With the economic uncertainty brought by the Covid-19, people are forced to spend the money more wisely which has resulted in the increased reduction of consumer spending. This reduction showed a negative effect on the digital payment processing services and card issuers who make money from transaction fees.
As per the latest statistics of McKinsey, the revenue of the global digital payment system is expected to be reduced to 10 per cent and become an economy of 1.86 trillion US dollars. Before the arrival of Covid-19 in the year 2020, the global digital payment system is predicted to touch the mark of 2.17 trillion US dollars by the end of the year 2021.
However, FinTech experts believe that it is too early to determine the impact of the Coronavirus on the digital payment industry. The effect could be ascertained in the long run, whether there has been a significant fall in digital payment as entertainment, travel and tourism industries are shut down since the start of the year 2020.
While some sectors such as Airlines, travel/tourism, entertainment, restaurant and clubs are directly affected by the Covid-19 outbreak and pulled down usages of the digital payment system. Below, we have a look at the impact of the Covid-19 on several sectors one by one.
According to the research conducted by the MX, a digital transformation platform for credit unions and banks shows 50% of the growth in mobile net banking usages in the year 2019. The research also states that digital payments made through debit and credit cards saw a decrease of 25% during the time of Covid-19.
According to a study conducted by a payment firm named FIS, around 45% of individuals have changed the way they make payments and are now using mobile banking to send and receive payment from one source to another source. The study further states that over 31% of participants have declined the cash payment and prefer cashless payments to ensure safety during Covid-19.
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Not only consumers but also government financial institutes also favour the usage of mobile net banking as it is an efficient and affordable way of making payments. Also, mobile banking helps to maintain social distance, which is the most needed thing right now. Digital payment through mobile banking can inhibit the spread of the coronavirus.
The Covid-19 outbreak has also promoted the usage of digital wallets such as Paytm, and PayPal to make cashless payments. Similar to mobile net banking, mobile wallets require less set-up and less surface contact.
Furthermore, most digital wallets provide seamless integration with the online retailer which makes it, even more, easier and safer for consumers to make payments. The future of digital wallets is bright in India, especially during the time of the Covid spread.
Not only consumers but retailers also adopted digital wallets as it allows them to receive online payment with minimal or no transaction fee.
Digital payment through cards has witnessed a surge of 75% during the time of Covid-19 according to a report of a finance institute named PayPoint. This surge results from the fear of consumers dealing with the cash during the presence of the coronavirus.
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During the period of Covid-19, we also saw a significant drop in ATM transactions from 39.9% to 31.1%. The main reason behind this is the reluctance to deal with cash and consumer’s preferences to stay indoors.
International payments are severely hit with the presence of the coronavirus. International payments have seen a decline of 20 per cent since March 2020. This decline is becoming sharper with time. The main prime reason behind the decline of international remittances is the fall in wages of migrant employees.
A sudden fall in the international payments not only affects the families of the migrant employees but also makes it difficult for the remittance payment service providers to cope with the volatile exchange rates and unprecedented flows. The remote working culture also affects the international payment service provider’s ability to continue their operations.
As mentioned, the spread of Covid-19 has affected every sector of the global economy and the overall effect has become more evident worldwide. Because of the lockdown and several other restrictions, people are grounded at home.
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Hence the employment and income of the various sectors such as airlines, movie theatres, offline shopping stores, hotels, restaurant, the automobile and retail industry. The digital payment came down for the aforementioned business sectors because of limitations in the movements.
With the arrival of coronavirus, the use of a digital payment system could be seen going up because people are favouring the use of various online payment methods to make payments for their online grocery shopping, utility bill payments, OTT subscription and so on.
It is no overstatement to say that Covid-19 has had quite a serious effect on the various business sectors. However, at this unprecedented time, one thing becomes evident that the consumers are inclining towards digital payments.
And it seems like the presence of coronavirus is likely to remain for a long and unpredictable time hence, people will get used to it and as a result, they will change their lifestyles and shopping pattern accordingly.
Another thing that becomes quite evident is people’s choice of shifting from cash payments to cashless payments.
For merchants providing online payment, functionality is no longer treated as a facility, it has become an essential thing. Any kind of business, whether it is online or offline needs to provide the digital payment option to survive in this unprecedented time.
The Covid-19 outbreak has widely affected the digital payment industry to a great extent. Few of the sectors have shown the positive impact of the Covid-19, while some others have shown its adverse effect.
After reading this post thoroughly, one thing that becomes pretty evident is, if any business wants to survive during the Covid-19 outbreak, they must need to adopt the digital payment system.
If you are a business that is looking to adopt the seamless digital payment system then choose BR Softech which is a pioneer name in the field of providing top-notch digital payment and mobile wallet solutions.
