New FinTech and Payments Trends During the Coronavirus Pandemic
It’s been widely acknowledged that the global pandemic has led to changes in the way people are managing their finances. As a result, the payments space has had to adapt and FinTech providers and innovators have been addressing the new demands of consumers and businesses. We explore the changing FinTech trends during the global pandemic.
How the COVID-19 pandemic is impacting the payments space
Like so many other industries, the payments space has been impacted in various ways as a result of the COVID-19 pandemic. The volume of payments, remittance and investments have decreased significantly, as businesses and consumers alike look to reduce their outgoings and cut back on new projects or non-essential purchases.
But there have been some positive outcomes. Government restrictions and responses to the pandemic have led to increased adoption of digital banking products. And service providers are finding ways to meet new demands and offering solutions to combat the impact of the coronavirus, triggering a host of new FinTech trends and initiatives.
Key FinTech trends triggered by the coronavirus pandemic
Contactless payments (increased limits and usage)
It’s no surprise that paying with cash was swiftly discouraged soon after the coronavirus started to wreak havoc. Limiting the spread of disease through hand-to-hand money exchanges in supermarkets, shops, and in general, was a no-brainer.
However, governments and payment service providers soon looked at the potential dangers of using keypads on card machines. The response was to encourage the public to use contactless cards and devices where possible. Obviously, not all cards have contactless payment capabilities and the low limit for contactless payments was a barrier. So, there was pressure to increase the limit. The contactless payments limit increase was announced, which came into effect on 1st April 2020 (in the UK).
How about the future? Well, 76% of Brits say they will continue using contactless after the current crisis, according to new research. (Source: Fintech Finance)
Increased adoption of online banking and mobile banking
High street banks were forced to reduce their hours and operations and people looked to avoid unnecessary trips, where possible (especially at the beginning of the lockdown), paving the way for increased adoption of online banking and mobile banking apps.
"Banking has changed irrevocably as a result of the pandemic. The pivot to digital has been supercharged,” says Jane Fraser, president of Citigroup (Source: Forbes)
Many consumers used to more traditional banking services have embraced digital banking options and banks have encouraged members to explore their digital services. Long term, it’s inevitable that a lot of these consumers will continue to use online and mobile banking services in preference to in-person banking, even after the pandemic has been overcome. The older demographic, for instance, has become reliant on digital communication devices and making online purchases during the lockdown. Many will enjoy the convenience of these services.
Way before the pandemic kicked in, banks have been evolving to maintain their high street presence. The big banks will have to reassess the value of their bricks and mortar operations. This will encourage challenger banks and mobile-only banking products, leading to an influx of new players and new FinTech trends around digital banking apps.
Growing popularity of mobile remittance apps
Last year, the global remittance space saw over 200 million migrant workers send money to 800 million family members, to the value of US$554 million, according to IFAD. However, the global crisis has caused a big drop in remittances, with an estimated 20% decline in international remittance volumes. The pandemic has hit people’s pockets and led to a shortfall in available money for migrant communities to send money home to family abroad.
But the popularity of mobile remittance apps has increased, whilst people have been urged to stay at home, and therefore using online remittance platforms and money transfer apps have emerged as the safe and convenient way to transfer money to loved ones abroad.
Before the pandemic, one of the growing FinTech trends was the surge of interest in mobile remittance. Just look at the advertising online and offline (especially public transport and stadiums) and you’ll see a big presence from money transfer providers, such as World Remit, Western Union and Azimo - the former two brands have direct partnerships with Arsenal and Liverpool. More traditional money wire/remittance providers, like MoneyGram and the aforementioned Western Union, have recently developed apps to move into the mobile remittance picture. And PayPal has heavily pushed its money transfer app, Xoom. We expect this trend to continue in the “new normal”.
FinTech initiatives to meet new demands during the coronavirus
Talking of this so-called new normal, FinTech companies have been working hard to provide products that meet the changing needs of consumers both during this pandemic and for the post-COVID-19 world, which will inevitably be a more digital-savvy one.
Here are some examples of FinTech initiatives and products rolled out to help individuals and businesses during the coronavirus pandemic:
- Starling Bank launched its ‘Connected Card’ debit card feature to help those self-isolating, allowing customers to give a “spare” debit card (linked to their account) to someone in need to spend on their behalf.
- Tide launched a Coronavirus Government Support Eligibility Checker to provide SMEs with an easy way to identify the financial help available to them and assist them in accessing the available support.
- UK FinTech and digital debt adviser Tully has been helping to distribute COVID-19 payment relief. Operated by Open Banking provider OpenWrks, Tully launched a new initiative, COVID-19 Relief and Wellbeing Network, to help companies register and validate customers who apply for financial relief.
- Railsbank launched a financial inclusion initiative called LightningAid, which enables government departments, NGOs and community groups to distribute financial support safely and directly to those in need.
- API builder TrueLayer offered its open banking services for free to help firms and governments quickly verify someone’s financial needs and also helps charities receive donations without incurring card interchange fees.
- AI-powered financial tool Digit released a Coronavirus Relief Hub to help members and non-members to access helpful information around personal finance, utilities, tax, debt, and more.
- Airwallex and several other global payments platforms announced they’d waive fees for a period of time to help customers impacted by the pandemic. Hastee waived all transaction fees for three months for all customers - 6 months for NHS workers.
- See how Currencies Direct has helped organisations in the Healthcare industry save over £100k as they fight to support patients infected with COVID-19.
Get more details on FinTech initiatives and trends in FinTech Futures’s article: Top 10 Coronavirus Initiatives by FinTechs.
Payments trends to continue in the new normal
Many FinTech trends and changes to consumer payments behaviours will continue into the new normal or post-COVID-19 world.
More than 45% of respondents say they have permanently changed how they interact with their bank since COVID-19. (Source: The Financial Brand)
This infographic shows some FinTech trends and interesting findings from recent research on shopping and payment behaviours expected to remain changed after the coronavirus spread and movement restrictions ease:
And here are some other payments trends set to remain in the new normal:
- Businesses, in particular restaurants, coffee-shops, fast food chains and retailers will encourage cashless payments as the standard
- Apps for ordering drinks and food from tables rather than counters will be encouraged*
- Online banking and mobile banking usage to continue to increase
- Mobile and digital-only banking services to become more widespread
- Increased demand for frictionless customer journeys and payment processes - during the pandemic, consumers have become more aware of the tactics used by brands to personalise experiences and will expect more of financial services providers to improve customer experience and support.
Summary - FinTech trends: Necessity to convenience
The major takeaway from the impact of the coronavirus on financial activity and payments trends is that what has been a necessity during the lockdown will soon become a preference and a convenience. Managing finances from the comfort of your home and the convenience of ordering everyday goods online and via mobile devices will be too appetising to revert back to more traditional processes.
Plus, the future of cash payments will be reviewed in many countries. Scandinavian countries have led the way for while in the use of quick-pay solutions and cashless payments, with cash exchanges a rarity. But the use of cash in the UK and the rest of Europe looks likely to be minimised. Cashless sports stadiums, like The Tottenham Hotspur Stadium, signify the way forward, and the coronavirus will encourage others to follow suit.
Finally, the increased reliance on digital banking services will inevitably mean heightened expectations of instant payments and seamless customer experiences. So, how can PSPs reduce friction from the payments process? Our recent blog explores the barriers to straight-through processing and how to overcome them by cleansing and validating reference data. Take a look!
Apply Financial is a SaaS business, based in London, which offers payment validation and data cleansing solutions to banks, corporates, financial institutions and payment services providers. Hundreds of organisations worldwide use our Validate tools. Our easy-to-integrate API helps companies to improve straight-through processing and prevent payment errors before they happen. Get in touch if you'd like to discuss our range of FinTech solutions.