#GFIAnalysis: Corona impacts — How is Covid-19 impacting the payments industry?

Consumers are unlikely to give much, if any, thought to the impact of the corona-crisis on the rarefied world of payments. But its pivotal role in ‘keeping the lights on’ as we WFH and its role in global innovation means it is seeing impacts across the financial supply chain. Kent Vorland, CCO of findexable, explains.

Companies and individuals all over the world are currently being affected by what’s likely to be the toughest trial most of us will ever experience. For us in the fintech sector, there’s certainly no exception.

Naughty, but needed

Understandably, companies generally don’t enjoy giving up a % of their hard-earned revenue to a company just so they can be paid the money that’s owed them, and to our knowledge there’s no payment equivalent of the trainspotter waking up to look forward to watching a ton of payments being made. Payments have simply evolved to accommodate evermore demanding consumers in a world where convenience is king — if I want to pay by card and you won’t let me, I’ll simply go next door or to another website.

Invisible, but very real

So what happens when the world sees a global economic downturn, businesses are shutting down and the payments ecosystem is disrupted?

Fig. 1: Push and pull — Coronavirus causing erratic changes in demand for cash
Fig. 1: Push and pull — Coronavirus causing erratic changes in demand for cash
Fig. 1: Push and pull — Coronavirus causing erratic changes in demand for cash

The first natural way to look at it is the distinction between face-to-face payments and e-commerce. Over the next few months we should expect to see ISOs, PFs and payment providers specialising in retail, in-person payments take a significant hit.

Some are more equal than others

If more shops close because of a prolonged lockdown, and we’re forced to stay inside our homes, or if the few shops that stay open run out of supplies we can expect another sharp spike in e-commerce transactions.

Because an e-commerce transaction is processed in industry lingo as a ‘Card Not Present’ transaction, and commands a higher transaction fee, then, depending on the number of transactions, acquirers may be making more money from your everyday shopping because now all of it is being done online.

Risky businesses

Over the coming weeks, payment businesses that are hit hardest will be ‘front-end’ providers — such as those specialising in face-to-face payments or physical retail, where card issuing banks and card schemes will see a drop, although not big enough to be a cause of concern or systemic damage.

Are you a survivor?

After a decade of disruption in payments and across financial services, not to mention the continuous reshuffling and offloading of merchant acquirer divisions by card-issuing banks and processors the coronavirus is likely to unleash a new wave of consolidation and competition for business that can thrive in any economic weather.

We can almost expect to feel the impact of the coronavirus on the payment transaction industry long after the pandemic has passed.

Stay informed.

For more information and insight — join our global briefings series over the next few weeks as we talk to fintech founders, ecosystem partners and institutions on the impact of coronavirus, and what comes next. www.findexable.com. Download The Global Fintech Index 2020 City Rankings on http://bit.ly/2020GFI

Findexable exists to collect, assemble and sort the world’s fintech data