COVID-19 Unprecedented Disruption Within the Payments Industry

One year since the UK went into lockdown, now looking back, there is no doubt that COVID-19 has had and continues to have far-reaching effects on industries of all sectors and sizes, enabling a movement of digital transformation that sees no signs of abating. For the payments industry, 2020 was a particularly significant year with the pandemic catalysing the digitisation of payments, setting in motion trends that have shifted the relationship between business and payments, and created an elevated role for the payments provider. 

Automation plans were accelerated

One of the most significant takeaways from the pandemic and its impact on our industry was how exposed businesses were to error, fraud and inefficiencies when relying on outdated, manual payments systems. Manual, cash-based methods were slowing businesses down, adding costs, and leaving huge scope for error and risks. It was clear that deploying technology that can manage supplier payments at scale, efficiently and effectively would be crucial in helping businesses get back on their feet. 

Take for example the travel industry; where firms had been relying on outdated payment methods such as cash, they were subsequently in a weak position to dispute transactions with the many suppliers involved upon the mass cancellations caused by COVID-19, leading to both financial and reputational damage. However, when using an automated process such as a Virtual Card, they benefited from chargeback rights set by the payment schemes, such as Mastercard and VISA, more seamless integration with existing systems as well as reducing the scope for human and administrative error.

While automation and the digitisation of payments was a trend already underway before the pandemic, the implications of COVID-19 meant businesses needed to streamline efficiencies more than ever; and at a greater pace than expected. 

A recent report from Accenture forecasts nearly 420 billion transactions worth US$7 trillion are expected to shift from cash to cards and digital payments by 2023 – and increase to US$48 trillion by 2030. In addition, with three-quarters (75%) of surveyed bank executives saying that the pandemic has increased the urgency of their plans to modernize payment systems. 

COVID-19 bolstered Cloud uptake

Using cloud-based payment solutions helped businesses offer thousands of refunds in a timely manner, particularly those in industries impacted by the ongoing nature of partial lockdowns. Cloud-based solutions were recognized for their agility and reliability  and ‘always on’ nature that businesses so desperately needed in managing their workflows during this time. According to HSBC’s Chief Architect, David Knott, investing in systems to accommodate cloud infrastructure can cut IT costs anywhere from 50% to 90%.

The trend is seeing no signs of abating. New findings from Synergy Research Group have revealed that cloud spending is up and has not been hampered by the ongoing COVID crisis. Q1 2020 spend on cloud infrastructure services reached $29bn, up 37% over the same time last year. Despite the inevitable economic downturn in the wake of the pandemic, cloud spending is estimated to rise 19% according to Gartner.

The role of the payments provider was elevated

The pandemic highlighted the true value that payments technology can have for a business. It reinforced that backend, manual processes are no longer viable due to behaviors such as working from home, and that we need to look at new technologies to help automate archaic processes. Not only did businesses come to realise how investing in payments technology could help eliminate inefficiencies during uncertain times, but also offer customers extra value, which is imperative for a business to rebound right now.

Digital payments helped enhance customer choice, allowing those who use them to do its business greater ease. For example, many card providers can offer multiple card schemes, payment types, currencies, issuing and settlement locations – giving companies optimal choice and flexibility to support them as they look to stabilise business volumes. It was this digital agility from payments providers that provided many businesses with the resilience they needed to stay afloat during the pandemic.

A testament to the opportunity that can come from digital payment transformation, our WEX research showed that 86 percent agree that companies that lead with technology will thrive in recovery from the current economic and health crisis and that and 83 percent have leveraged payment technology to innovate new sources of business value.

In addition, our WEX research in collaboration with The Economist revealed that 72 percent of executives in financial services and technology are more digitally agile than before the pandemic.