The payments industry has seen a lot of innovation in the past decade, and the latest fintech disruptors are set on making payments more user-friendly and efficient for both consumers and businesses. COVID-19 was both a stressor and accelerator for SMEs, many of which have gone into overdrive to respond to the crisis.
The fintech industry is doing its part to support businesses and individuals affected by COVID-19. Some payment providers have temporarily waived chargeback and funds transfer fees. Others provide free of charge financial advice to their customers, and some even ensure free access to accounting solutions to freelancers and SMEs.
More significant trends emerged, as prompted by social distancing measures, with contactless adoption growing massively. In the UK, contactless payments alone accounted for 88.6% of total card payments in the last year. In fact, the UK has now ranked the third most cashless country in the world, only behind Canada and Sweden.
It’s clear that consumer demand is driving fintech development and that the pandemic may have triggered the next chapter for the payments sector.
The most popular payment solutions during the pandemic
Contactless card payments
Contactless cards were introduced in 2007 – back then, they had a £10 spending limit. This limit has gradually increased, and, prompted by the pandemic, the maximum contactless payment permitted is now £45.
However, UK Finance (the banking industry trade body) has been asking the HM Treasury to consider further increasing the maximum amount that can be paid using contactless to £100.
While cards are still most commonly used, other types of contactless payments via mobile devices and smartwatches have grown in popularity, especially among younger consumers. Apple Pay, Google Pay, and Samsung Pay are the most prominent mobile wallets currently accepted in the UK.
According to Capgemini’s World Payments report, 2020 has seen an increase in internet banking – 68% of the consumer survey respondents marked direct account transfers as their preferred payment method.
New technology payment solutions
For some events, contactless wristbands are increasing in popularity while also helping to save on queue times. Similarly, customers are also testing QR code payment options that prompt eWallet or card payments. New tech like microchip implants and fingerprint/biometric authentication for contactless payments are still being tested.
NatWest started providing a payment solution for vulnerable people who couldn’t do the shopping themselves: a “companion card”. This card is loaded with virtual cash (similar to a gift card) and can be used by carers for the weekly shop, for example.
Boosting fintech innovation
An area of focus for the financial sector, particularly during the pandemic, is creatively thinking about seizing opportunities to engage with customers despite the social distancing requirements. Here are some of the key areas that continue to boost innovation in this sector:
The pandemic accelerated partnerships between fintech and financial institutions, which blended new digital solutions with robust compliance infrastructure and capital. We’ve also seen partnerships with local governments that helped with the digital adoption of payment solutions like Trust Payments did with the Malta Chamber of SMEs. The result was to help business owners reduce the costs of accepting card payments.
The pandemic’s impact was especially resonant in developing countries that don’t have a developed financial system. According to the Worldbank, there are still 1.7 billion people globally without access to the banking system.
Fintechs can play an important role by developing strategic partnerships with governments and financial institutions to lower the digital barrier and help provide essential financial services. An excellent example of this is the rollout of WeChat in China, where users can get updates from the government, make everyday payments, apply for a loan, or even pay for a taxi using the application.
Expanding beyond essential contactless payments, fintech can also boost payment solutions in the IoT space – connected cars that allow consumers to pay for gas or food without handling cash or touching potentially infected surfaces. Similarly, home appliance manufacturers are working with payment solution providers to embed shopping apps into smart appliances like refrigerators, allowing consumers to buy groceries and pay right from the fridge’s door.
Due to its adaptability, the fintech industry is well placed to overcome the pandemic and change society in a meaningful way. Continued Open Banking innovation will help consumers and businesses alike to access various payment solutions while significantly reducing costs and staying flexible.