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How is the Pandemic Affecting the Payment Processing Industry

For over a year, almost the entire market remained shut. With lockdowns lifting and markets slowly and partially reopening, transactions are increasing too. However, nothing will be the same for a long time, if ever.

It currently seems like a mass vaccination strategy is the only way to start the move back to a pre-Covid world. Till then, businesses need to keep adapting to new changes in customer behaviour and market trends. Online payment systems and credit card processing service companies are the best placed to help businesses move online to stay afloat till the global economy stabilises.

Despite several attempts at introducing varying fiscal stimuli, no one can entirely accurately predict the exact extent of the damage done or whether the effects of the lockdowns can ever be reversed. Additionally, industries related to travel such as aviation and tourism have been hit the worst and will take years to return to their previous state.

A report from 2019 predicted a 6% rise in the payments industry of the world. However, this has changed in 2020 and is now estimated to fall by 8-10%, which is estimated to be $165-210 billion. Looking ahead and expecting this revenue decline, payment companies’ share prices have fallen sharply, way below the profit impact that was expected.

With a mass-scale global impact, Covid-19 has completely changed the future of payment processing. Let’s take a look at some of the damage done and how virtual payment gateways are the solution.

1. Cross-border C2B transactions have fallen.

According to several reports, 25% of the fall in consumer-to-business monetary transactions is caused by cross-border payments. This is interpreted as a loss of over a quarter of cross-border consumer-to-business transactions. A major cause for this is the destruction of the travel, tourism and hospitality industries, along with the growing demand for localised ecosystems for commerce as well as local production campaigns. The most vulnerable markets at this time are Saudi Arabia (where travel and entertainment account for 40% of its online payments) and Thailand (a leading international destination for travellers). Several expat markets like UAE and Singapore have also seen dips in revenue. With lockdowns opening up and businesses and services moving online, these transactions will slowly and steadily rise.

2. Global B2B transactions have also been hit.

Dealings with freight containers have taken a major hit since the start of 2020 when compared with the same period a year ago. Countries around the world will recover at varying paces, which means their markets won’t all open at the same time. This will disrupt supply chains across the world.

3. Securities transactions are higher than ever.

High securities transactions indicate instability in the market. The volatility of the current securities market has given rise to a higher degree of risk for international transactions. However, with more people gaining access to easy-investing apps, the market might stabilise faster than expected.

4. Retail merchants and payment services are badly hit.

Transaction volumes of POS (point-of-sale) gateways have seen a decline of 30-40% through 2020. However, online payments have not suffered that greatly. According to data shared by retail analytics firms, footfall in stores was down by 20% in the UK and by over 70% in Italy and the United States in March 2020. This was compared to footfall in March 2019. There has been a steady decline in cultural hubs, travel, restaurants, hotels and hospitality industries, almost on the brink of collapsing. These industries made up over 30% of family expenditures within the European Union in 2018 with a much high POS transaction percentage.

5. FinTech wallets and gig economies are falling.

At a time when people cannot step out, ride-hailing services like Uber and offline payment methodologies have been hit pretty hard. Meanwhile, food delivery services and online payments are holding steady as people turn to remote services and contactless payments.

Through all the changes in the market today, the goal is to merely survive this shift and not become obsolete.

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