Coronavirus And Its Significant Impact On The Payments Industry

Jun 16, 2020

The payment industry was negatively hit by the pandemic; only time will reveal the lasting impact. 

On a human and economic scale, the COVID-19 virus has wreaked havoc. One of the many ways that the global pandemic has affected consumers is how they shop. With government regulations strongly urging social distancing and essential shopping, consumers are still leery of going about their shopping in public places. As more employees were driven to work from home more than ever, this too has brought about changes in the way they shop and make their payments. 

When it comes to making payments, customers are also less inclined to pay with cash, although it has yet to be scientifically proven as to whether this virus can attach itself to currency.

As a result of fears of possible contamination, customers are becoming more open to adopting digital wallets and contactless payments. Recent studies have indicated that once cynical Americans are growing more curious about contactless payments. Before the coronavirus hit Germany, 35 percent of Germans were using contactless payments. Since the virus, it is up to more than half.

How Will eCommerce Be Affected?

As more consumers are being confined at home, they are likely to buy their necessities online. There will also be new consumers who will be making online purchases for the first time and in new categories. This is particularly being seen in household items as well as groceries. 

If online companies can weather the tumultuous storm, they stand to experience a long-term surge in revenue. However, this new era brings both opportunities and risk. Here are some examples:

  • Amazon takeover: With the rampant closure of physical stores, forcing countless out of business, Amazon has stepped in to fill in the gap. They hope to scoop up more sales from customers that are not able or willing to go to shop at a physical store.
  • Sourcing supplies: The biggest problem that online businesses face is the ability to source their supplies. With China being one of the largest suppliers in the world, the widespread closures of their factories has created massive disruption in customer fulfillment.
  • Credit card fraud: The pandemic has presented radical changes in consumer behavior and that means that both retailers and financial institutions must employ robust fraud controls to stave off fraud. In fact, TransUnion has found that 22% of consumers surveyed were targeted by “digital fraud” due to the COVID-19 outbreak.

Implications For Fintech

Fintech has certainly taken a financial hit during the outbreak and is suffering from significant constraints. The Payments Journal has outlined both the negative and positive impact that the coronavirus has had on every facet of business. They are outlined below:

  • Both Visa and Mastercard eliminated their “predictions for revenue” since the COVID-19 pandemic.
  • As a result of travel restrictions, airlines are having to both cancel and reimburse all flights.
  • Paypal has announced a decrease in “eCommerce activity” due to coronavirus

On the upside…

  • Ye Yanfei of the Banking and Insurance Regulatory Commissions Company announced that blockchain is being used for “medical data verification”.
  • Countries worldwide are urging the use of contactless payments to discourage the spread of the virus due to exchange of money.

Looking Ahead

The aforementioned effects of the coronavirus on the payments industry offer only a glimpse and are not representative of the entire picture of the complete economic impact. The overall implications are yet to be determined. 

The virus itself and the measures taken to control it has brought unprecedented change to our lives and the economy. Although digital payments and ecommerce continue to enjoy growth, it is likely that the payment businesses will see a dramatic drop in business as overall consumer spending plummets.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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