As social distancing has become a part of people’s daily lives during the COVID-19 period, the pandemic is also driving the trend towards contactless transactions in payments.
While some people may have been inspired to hoard cash at home at this time, in terms of daily transactions, the pandemic has been a significant accelerator in digital and mobile payments.
As people shy away from contact with others for health reasons, the act of paying has taken on a different importance. For many, the solution has been to leave the cash at home and wave a contactless card or QR code on a smartphone to get the transaction done.
Use cases become diverse, numerous
All over the world, there are examples of the accelerated uptake in digital payments, a trend that has had broader implications beyond the simple act of paying.
Once seen as a trend for millennials and younger people, older Baby Boomers are now — sometimes reluctantly — being dragged into the world of digital payments as an adjacent behavioral change to social distancing.
Already it has given fresh impetus to fintechs and even established market players to bring new business models to the market with are based on payments innovation.
In Australia, the “buy now pay later” model of companies like Afterpay saw massive uptake, and now presents a challenge to the traditional credit card.
There has also been a surge in the number of new loyalty-based schemes rolled out by increasingly diverse market players from different sectors. They are often seen as a first step towards the new world of tokenization.
In Sydney, a small local chamber of commerce in the inner city has launched its own “closed-loop” scheme as a way to boost local businesses called Local Rewards, with plans to take the local angle national.
In the Philippines, digital payments firm PayMaya held a virtual briefing recently in which it talked up its solution for the end to end digitization of the country’s entire transport chain.
The company’s enterprise head for the public sector, Marvin C Santos, told the briefing that his vision was for contactless payments to be implemented in an ecosystem comprising service providers, commuters, transport hubs, delivery companies, and petroleum firms.
“Our complete suite of cashless payment solutions can help empower all modes of transportation, from tricycle drivers to jeepneys, all the way to premium taxis, buses, and other forms of mass transportation around the country,” Santos said.
PayMaya has signed several agreements with providers, such as airport shuttle services, taxi companies, and a regional city transport authority, which accepts both QR codes and card payments.
Elsewhere in Asia, some transactions which have long been cash only have recently gone digital due to COVID-19, such as payments for hawkers’ food in Malaysia.
There, the Hawkers and Petty Traders Association are pushing for a new system of digital payments, which can function as a digitized platform to bring the traders into the orbit of social security and government pension payments. It also has a loyalty component.
Cashless platforms are being pushed hard by the central government as it drives a pivot towards e-commerce, and the move was kickstarted by a complimentary e-wallet for citizens.
In just about every market around the world, similar things are happening as social distancing increasingly demands frictionless payment methods.
New models emerge
Retail is moving more online, and payments across the board are becoming digitized. Even central banks such as the People’s Bank of China are planning the launch of digital-only currencies.
It is a phenomenon in itself, but the next question is how this will evolve in the future.
Market players who can section off a whole slice of transaction types and create an actual financial ecosystem have some intriguing options as they ponder their next steps.
As soon as they introduce other elements, such as loyalty points or discounts, they are immediately creating their digital economy with its own set of rules.
From there, it’s not difficult to imagine tokenizing the value of units within the ecosystem and effectively creating a hermetic digital currency. Then there is the option of finding some way to securitize the value of the ecosystem, creating even more value.
There are probably many new business models and applications, as yet unknown, which can come from this.
The strange thing is that it has been given a big shot in the arm by the pandemic disruptions, proving once again that business is nothing if not adaptable and that from a crisis can come fresh opportunities.
Photo credit: iStockphoto/Tero Vesalainen