The coronavirus pandemic has a significant effect on the mobile payments market, as consumers and companies have been forced to alter their buying habits significantly, and the banking industry is working to maintain cash access while keeping customers safe.
Even before the COVID-19 pandemic wreaked havoc on the health and economic systems, contactless payments were a popular mode of payment. However, once the companies reopened, they had to keep germ-conscious customers in mind while still adjusting to the new normal of social distancing.
Mobile payments automate payment systems instead of paying with cash, cheque, or credit cards. The technological advancement in the smartphone has allowed on-the-go fund transfer and POS at retail terminals. Mobile payments of different forms are used for a variety of operations, such as ordering takeaway food, buying movie tickets, and updating smartphone games, in a wide range of end-user industries.
The stores and services worldwide are rapidly adopting and integrating mobile payment applications like PayPal, Samsung Pay, Apple Pay, AliPay, and WeChat Pay, to accept payments. This trend is predicted to continue in the coming years due to evolving lifestyles, daily commerce, and rapid growth in online retailing.
With the rapidly expanding global economy, mobile phones (particularly smartphones) have become indispensable commodities for individuals. Likewise, for many people, the internet has become an important part of their everyday lives. This has increased the global penetration of smartphones and internet users, fueling the growth of the mobile payment industry.
Due to the industry’s rapid growth, businesses are investing heavily in mobile payment technology. In the Indian market, for instance, WhatsApp is collaborating with ICICI Bank to launch a mobile payment feature through UPI (unified payments interface).
Many governments are also encouraging banks to develop infrastructure to allow safe and secure mobile payments in rural areas, creating enormous opportunities for vendors.
Market Research Future (MRFR) predicts the global mobile payments market is expected to achieve USD 3,300 billion at 32% of CAGR between 2017 and 2023.
Impact of COVID-19 on the Worldwide Mobile Payments Market
According to MX, a digital transformation platform for credit unions and banks, there has been a 50% increase in mobile banking activity since the end of 2019. It also showed that purchases made with debit and credit cards dropped by 25% during the COVID-19 pandemic.
Surprisingly, 60% of participants stated that their primary financial institution does not help them become financially stronger. They would also like to move to mobile banking.
According to a report conducted by payment firm FIS, the COVID-19 pandemic is also pushing customers in the United States toward digital payments and mobile banking.
According to the report, nearly 45% of banked participants have altered their relationships with their financial institutions. Online or mobile banking is now used by 39% of Gen Xers, 46% of baby boomers, and 36% of millennials.
Due to the COVID-19 pandemic, approximately 31% of participants would prefer to use mobile payments and contactless payment methods instead of cash, according to the report.
This spike is not limited to the United States. Also, in a developing country like Rwanda, mobile money services are being widely used in the midst of the COVID-19 pandemic. In the country, there have been an unexpected increase in person-to-person (P2P) transfers.
To put this in context, consider the first week of January when the total amount of funds transferred through P2P transfers was about RWF 7.2 billion, which is equal to the US $7.6 million. However, by the end of April, this value had risen to RWF 40 billion, which is equal to more than US $42 million. The rise is approximately 450%
Nigeria’s case is also very similar. According to many analysts, mobile money transactions in the country increased by 15% in March, and the number is expected to grow further in the following days.
Not only consumers but also governments and authorities have used mobile money to provide reliable and accessible financial services while also addressing realistic challenges. Mobile money has emerged as an efficient and socially acceptable alternative to cash.
Mobile money and other digital payment solutions, like contactless payments, mobile wallet payments, QR code payments, NFC payments, facial recognition, and so on, will help to slow the virus’s spread.
As the COVID scenario unfolds, its effect on consumer behavior and perceptions, as well as those of companies, will become evident. However, after the pandemic has ended, it is clear that we will return to a new normal. To aid recovery and pave the way for this new normal, the digital payments ecosystem must develop rapidly and play a role in shaping the post-COVID world.
*Ehtesham Peerzade writes from Market Research Future