When COVID-19 brought the globe to a standstill, it was the growth of online payment solutions that kept the lights on, and the money flowing, when much of the world was closed. We are all still coming to terms with both the human and financial costs of the pandemic and subsequent restrictions. Life has, in many ways, returned to a “new normal.” Businesses have, for the most part, reopened their doors and many of the restrictions on travel have been lifted. However, many aspects of day-to-day life have changed permanently - one of those being payments
Both the physical restrictions and the aversion to traditional paper money during the pandemic saw a rapid change in how customers and companies made and received payments. Digital-first solutions were found to fill the voids left and those solutions are here to stay.
According to a survey conducted by Visa, which looked at small business owners and consumers in eight countries, nearly four in five (78 percent) of consumers said that they had made changes to the way they pay for items due to COVID-19. This includes shopping online whenever possible, with nearly half (49 percent) of those surveyed saying that they pursued this option, while (48 percent) said they were now using contactless payment and not using cash as much (46 percent).
The importance of having alternative payment options can not be overstated for upcoming businesses. Almost half of the consumers surveyed said that contactless payment options were one of the most important safety measures stores can offer. A further 47 percent of those surveyed said they will not shop at a business that doesn’t provide a contactless way to pay.
The changes seen over the pandemic may have come from a health-conscious point of view, as people avoided touching physical currency – but they are here to stay. Of those surveyed, 39 percent said they have kept on using contactless cards and 35 percent have kept using mobile payments. More than three in five (62 percent) said they have used cash less often and one in eight (12 percent) said they had stopped using cash altogether.
So where does this leave startups in the modern world, with the decline of cash?
According to an analysis by PwC and Strategy, cashless payment volumes across the globe are set to rise by more than 80 percent from 2020 to 2025. This means that startups entering the market now, need to prepare for this in the near future.
However, the technological advancements that the fintech sector has enjoyed over the past few years mean that they can provide a service that larger, more established companies can do themselves. Much like the changes in how consumers experience payments, the fintech sector is quickly changing how money flows from business to business.
Gone are the days of lengthy waits for a cheque to come in the post. Advances in technology now allow businesses to make global payments with the ease, and pace not seen before. This ease and speed allow businesses to grow solid relationships with other companies, as well as their customers.
Advances in fintech technology have also changed the way both parties involved in a transaction can keep track of the cash flow.
In days gone by, money crossing borders would somewhat temporarily disappear as it moved from one account to another. Nowadays, however, money can be tracked from one account to another with complete transparency.
Along with transparency, a change in how companies pay fees has come with the growth of fintech. With traditional methods, the money would pass through numerous bank accounts as it moved across borders, with each bank charging a fee as it moved. Modern fintech allows companies to bypass these hurdles, and therefore, the associated fees.
It also allows companies to move money without having to navigate fluctuations in currency exchange rates. Avoiding both this factor and the banking fees allows companies to send the exact amount the other party is expecting to receive – saving the financial departments of the sender a considerable amount of estimation and subsequent headaches.
Security is another important factor businesses must consider when making payments. As large volumes of money change hands, criminals are never far away with fraud costing businesses trillions each year.
But solutions brought forward by the fintech sector provide security in ways never seen before. Advanced automated technology designed to detect both fraud and money laundering is quickly becoming a thorn in the side of those who target companies in these manners.
Through these various means, fintech companies can provide startups with the services needed to keep at pace with the ever-changing world.
Keyword: Fintech offers alternatives as cash dominance decreases>