Peter Theunis, CEO of Radar Payments by BPC, makes a thorough overview on how implementing mobile payment methods can help with better navigating the COVID-19 pandemic.
A habit is a settled tendency or behaviour that becomes automatic and is hard to give up. Run at 6, coffee at 7, tea at 4, groceries on Saturday… It takes 21 to 66 days to form a new habit. The world being on lockdown for seven weeks has been a breaking moment for many of our habits. One that’s universal is the way we pay.
As James Clear tells us in his New York Times bestseller Atomic Habits, the best way to break a bad habit is to make following it impossible. And the best way of adopting a new habit is to make it automatic, sometimes supported by technology that makes whatever it is easier to do, frictionless and sure to deliver returns.
One thing is clear: the pandemic and so-far-seven-week lockdown have broken our payment habits, thanks to the need to eliminate cash for hygiene reasons and the availability of contactless technology. Paying with a tap of a card, a mobile wallet or a fitbit smartwatch has become the new norm. Contactless payment is here and every day new people are being taught how to use this new service. Surely, they will never again pay for goods the way they used to.
The move to a cashless society
Shifting to contactless payment was a direct response to the World Health Organization’s (WHO) guidance. Payment networks globally are doing their bit by increasing contactless payment limits in a bid to promote payments that are more hygienic.
As a result, even cash-heavy countries have seen contactless payments grow. For instance, Germany has seen contactless payments go from 35% to 50% of card transactions since it raised the cap from EUR 25 to EUR 50. Mastercard has confirmed the shift, stating that 50% of consumers are now using contactless payment. McKinsey & Company has identified a steep decline in cash transactions, to just below 80% from almost 90%.
All central banks, led by government measures, are reducing the use of cash, which passes through too many hands and cannot be safely controlled.
Contactless payment is here, but is it here to stay?
If we look at the science behind habits, contactless payment should be here to stay. However, paying using near field communication (NFC) is undesirable amid current hygiene concerns because you have to enter a PIN above a certain amount. The European Commission’s ‘Strong Customer Authentication’ (SCA) regulation could still hold back the use of contactless payment as it will require that cardholders validate their identity by entering a PIN when they reach a cumulative spend of EUR 150. Will it be enough for your weekly or monthly spend? What if you have a large household or run a small business? With the SCA deadline delayed, it will be interesting to see how the European Commission will consider the current pandemic crisis to facilitate universal contactless payment with new limits or new forms of verification, contactless too.
Again, one thing is certain: financial institutions, central banks, national payment infrastructures, payment service providers, and merchants alike need to be ready to accelerate their digital payment agenda. They will need to improve the checkout experience, both in-store and online, and apply stronger security, all while providing a better user experience. The post-Covid-19 period will be critical from loyalty, customer acquisition, and competitive standpoints.
Which contactless payment methods?
Looking at contactless payment across the globe, Covid-19 will be driving a completely new set of payment trends that ecosystem providers will need to enable, fast. In fact, contactless payment doesn’t even mean you need a card in hand, especially in countries where card adoption isn’t high or where merchants just aren’t equipped. This goes for both developed countries and countries in development.
Indeed, we talk about a surge in implementation for new checkout experiences using facial recognition, digital wallets such as ApplePay and GooglePay, embedded payment systems in cars and more. However, not everyone can deploy such infrastructures quickly or invest heavily when the time is uncertain. With the need for speed, financial institutions should not miss out on cost-effective payment methods that could get their breakthrough moment pending our habits changing as we get exposed and accustomed to new technologies.
QR codes could have their breakthrough worldwide
Quick-response code-based payments (QR codes), already popular in some parts of the world, are now gaining traction in other regions and not only in emerging markets. In developed countries, they were known until now only as website hyperlinks. In other parts of the world like China, however, they are commonly used for payment.
QR codes can take different forms – e.g. static, generated in advance – and they prove the merchant’s identity via a code simply displayed on a poster. The buyer needs only to set the amount to confirm the transaction. In their dynamic form, new QR codes are generated at the time of purchase with all the information required: merchant’s identity, buyer’s identity, amount to be paid. QR codes are used everywhere — petrol stations, grocery stores, public transport, and many other services – and can be used from a couple of metres away, meaning that they comply with strict social distancing rules, unlike NFC technologies.
Their breakthrough could also be indirectly influenced by governments, which have started to deploy QR code systems to authorise and track the movement of residents during the health crisis, thus influencing our habits in using such technology. QR codes are commonly implemented in city transport systems where purchasing a metro, bus, or tollgate ticket is digitalised to enable a fast contactless experience. National payment infrastructures can be set up inexpensively and quickly and do not require merchants to invest in new POS infrastructure. They also reduce the price of processing a payment transaction.
Instead of adopting a wait-and-see approach, central banks, national payment infrastructures, banks, and payment system providers (PSPs) need to take action to lead and co-create new payment experiences that will meet social distancing rules while keeping them ahead of the curve. Taking action means implementing wider contactless payment choice beyond the card, reinforcing security and fraud prevention measures as new payment methods arise, building new infrastructure to support in-store and online merchants and, if building or scaling in the short term is not possible, collaborating and co-creating with processors to cloud it!
We cannot predict what the future of payments will be. However, if we change people’s habits, those new habits will lead the direction of future payments.