Virtual economy bolsters payments industry amid COVID-19 crisis, says Monoova
June 3, 2020
The rapid transition to a global virtual economy has largely bolstered the payments industry amid the COVID-19 crisis as an increasing proportion of payments continue to migrate online, according to end-to-end payments provider Monoova.
Commenting on the growing global reliance on online services over the past few months, Monoova CEO Christian Westerlind Wigstrom was positive on the medium to long term impact for the sector, despite some short-term headwinds.
“When high-street shops were closed and people were quarantined in their homes, the virtual economy ensured an alternative supply of everything from books and movies to education and medical advice. In the early stages of lockdown, we saw Chinese e-commerce grow by 20% and in Italy, the number was even higher at 81%1, contributing to a sharp rise in online payments,” Mr Westerlind Wigstrom said. “In Australia, e-commerce giant PayPal recorded their strongest monthly result ever in April2– just when lock-down was the most severe.”
As restrictions in Australia, and globally, start to ease this month, Mr Westerlind Wigstrom noted that the payments industry would not be completely immune from the impact of the crisis.
“While more shop and restaurant doors start to open, huge swathes of the global economy remain in free fall. Industries which were unable to move online at the peak of the pandemic are laying off staff who therefore have less to spend, which translates into less demand both offline and online. As a result of this, we might well see the payments industry contract in the short term.”
Fertile ground for nimble payments operators
Over the medium to long term, however, Mr Westerlind Wigstrom said many of the online habits formed or accelerated in lock-down were likely to serve the payments industry well into the future.
“First and foremost, we expect to see an even faster decline in physical cash. Consumers’ online expectations are also more demanding than offline. While we accept queueing to pay in shops (albeit at a 1.5m distance), virtual consumer conversions rely on microsecond execution.
“This creates fertile ground for innovative payment companies to offer greater speed and more seamless experiences through real-time payments capabilities, digital identification of transacting parties, and by offering pre-set checkout preferences.”
Mr Westerlind Wigstrom explained as the portion of online purchases increases, the dominance of credit cards is also likely to be weakened.
“While convenient when shopping in store, credit cards do not have the same competitive advantage online compared to, say, virtual wallets. Credit cards are often more expensive than competing methods such as the New Payments Platform (NPP) in Australia. This opens opportunities for smaller payments companies, arguably creating a more vibrant industry than before the crisis.”
Since inception, Monoova has processed more than 2 billion dollars through its proprietary payments software. Its growing client portfolio which includes some of the country’s most innovative and high-growth businesses such as ASX-Listed firm Splitit, DiviPay and Supay.
1. McKinsey and Company, How payments can adjust to the Coronavirus pandemic – and help the world adapt: https://www.mckinsey.com/industries/financial-services/our-insights/how-payments-can-adjust-to-the-coronavirus-pandemic-and-help-the-world-adapt
2. PayPal, COVID brings cashless revolution five years closer as digital payments surge during pandemic: https://newsroom.au.paypalcorp.com/cashlessrevolutionfiveyearscloser