The covid-19 pandemic has wreaked havoc on the global economy, causing some industries to shut down entirely for most of the last year. But as well as the damage it has caused, the pandemic has also led to some significant changes in the behaviour of both consumers and businesses.
Now that the economy is reopening, businesses across the board are focused on how they can begin to recover from the financial damage they have suffered.
Some industries have been hit much harder than others. For example, the retail sector has suffered greatly from the pandemic’s impact. According to research from Retail Research, around 180,000 retail jobs were lost over the course of 2020, and the trend has persisted into 2021.
For many businesses, recovering from covid is going to require more than just a return to their pre-pandemic levels of trade. Long-term solutions are needed that reflect the fact that the world has changed over the last year.
One of the many changes accelerated by the pandemic was the shift towards digital banking. Before the pandemic, cash was gradually fading away in favour of digital payment methods.
But fears about viral transmission via contaminated coins and banknotes saw consumers encouraged to ditch cash wherever possible. Instead, consumers turned to newer payment methods such as contactless bank cards and smartphone apps.
This sudden and dramatic change in consumer behaviour has highlighted some serious deficiencies in the way that traditional payment processing works. Digital payment methods are no doubt more convenient for the consumer, but the cost of taking payments this way can be huge for businesses.
Worse still, these extra costs, like payment processing fees, are hidden from the consumer; many people don’t realise they even exist. For businesses already hurting from the decline in trade over the last year, these costs have gone from being a source of irritation to a threat to their financial stability.
Instant payments technology could provide businesses with a solution without diminishing the speed and convenience of digital payments for consumers.
Instant payments are already in use in other countries, and they have proved to be a roaring success.
When consumers pay via an instant payment, the funds they spend are transferred directly from their bank account to the seller’s bank account. Within the European nations that have already begun using instant payments, they now account for as much as 20% of all payments in some areas.
Delia Pedersoli, COO of MultiPay Global Solutions comments:
“Instant payments have been a huge success in other parts of the world and have proven that the technology needed to underpin them works and works well. For the UK, it is simply a matter of the Bank of England changing its legislation that would enable instant payments to quickly be rolled out.”
“Many existing payment terminals can already take instant payments and just need a software update to be ready. On the consumer side, instant payment can be provided by a mobile app, that can read a QR code that can then be scanned for payment. With security already baked into mobile devices that allow payments such as passcodes, facial recognition technology and biometrics, there is no reduction in security or added risk for consumers. The UK may like to lay claim to being the fintech capital of the world, but until it eases up legislation around areas like instant payments, it makes it hard for this to be conclusively proved. “
How businesses benefit
Introducing instant payments would benefit British businesses in numerous ways. As David Maisey, CEO of MultiPay Global Solutions pointed out in The Raconteur, instant payments could be game-changing in terms of managing business cash flow; something that many retailers were concerned about even before covid.
There’s no need to wait for funds to clear before they’re available to businesses with instant payments. As soon as instant payment transactions are completed, the funds are immediately available in the business’s bank account.
Frasers Group, which owns the Sports Direct brand, has also spoken out in support of introducing instant payments. Tony Westwater, head of IT at Frasers Group, points out that “[Younger consumers] want to try new payment methods and aren’t as attached as older customers are to debit and credit cards. Instant payments offer them something new to try from their mobile device, which is now becoming their primary payment vehicle.”
Because funds are transferred immediately when using instant payments, consumers will also benefit from being able to track their spending and monitor their finances more easily. For young consumers who have grown up in a digital-first world, things like waiting periods for funds to clear seem like relics from a bygone era.
Introducing instant payments won’t address all the problems facing businesses as they recover from the covid pandemic. However, they would benefit businesses and consumers as they navigate the post-pandemic economy and provide a much-needed boost for struggling retailers.