The below is an opinion piece by ELA Asset Management CEO Faadil Moti.
2020 has marked the beginning of a new era for digital payments. While the sector was experiencing strong growth prior to the unexpected onslaught of the pandemic,COVID-19 has rapidly accelerated the global shift to digital payments. In essence, we are seeing 3 to 5 years of change condensed into a matter of months.
More than halfway into the year, the world is a completely different place to what it was a mere 6 months ago. COVID-19 has created huge and sudden challenges to societies and businesses across the globe, majorly disrupting the way we live and work. Amid these colossal changes, one thing is certain – COVID-19 will effect a lasting global adoption of digital payments.
Farewell to cash?
The lockdown and social distancing has dramatically shifted consumer behaviour. Consumers are growing increasingly weary of the use of cash despite research not yet supporting the theory that cash can spread the Coronavirus.
Hyper awareness of germs are disrupting what were once influential market disruptors including debit and credit cards, ATMs and point of sale machines. These payment mechanisms are being replaced by new, contactless payment solutions including tap and go, digital wallets, mobile payment solutions and buy now pay later platforms.
While the COVID-19 pandemic started off as a global health emergency, it has very quickly turned the global economy on its head, pushing people to think and behave differently in this ‘new normal’, with many of these behavioural changes expected to last long after the virus dissipates.
A recent report by the World Economic Forum says digital payments will be at the centre of the digital transformation of the global economy.
“Digital payments are at the centre of this transformation, connecting merchants and consumers around the world and enabling new avenues for global commerce.”
Greater financial inclusion
Digital payments in Africa have already significantly helped advance financial inclusion, especially among low-income and hard-to-reach communities.
With over 66% of adults in Sub-Saharan Africa lacking access to traditional bank accounts, digital payments, specifically mobile money, had already made significant strides in bridging the financial gap on the continent. With the pandemic further spurring the global adoption of digital payments, millions of Africans will be able to join the financial world outside the traditional context of brick and mortar banks.
Within a South African context, this digital payment boom means greater financial inclusion, especially among its unbanked population which is estimated to be around 11 million people.
Not without challenges
The rapid advancement and adoption of digital payments is not without its challenges including market barriers and security threats.
Financial service providers therefore need to work hard to gain consumer trust by adopting long-term solutions that strengthen and protect their payment operations, specifically when it comes to data security by investing in new processes and technology that will support digital payment systems.
A new era
Like the 2003 SARS crisis in China accelerated the adoption of eCommerce, and the 2008 financial crisis reshaping the global banking industry, the COVID-19 crisis is ushering in a new era for the global payments industry.
Financial services firms that are agile, adaptable and innovative in their response will certainly set themselves apart in the long term, especially those who strive to solve consumer concerns around minimizing contact during pandemic and beyond.
ELA Asset Management is a boutique trading, foreign payment solutions and asset management firm focused on best practice, systems and procedures that deliver transparent service. Established in 2018, Ela aims to deliver bespoke solutions to its client base of both corporate clients and individuals by providing products that are customised to suit both corporate and individual needs.