The Covid-19 Pandemic at One Year: How Payments Have Changed Forever
We’ve now been living under lockdown for one year, which has forced us all to change the way we move through the world – from simple things like wearing face masks and maintaining our physical distance to more macro adaptations like changing the way we shop and pay for things.
While the pandemic severely impacted businesses around the world, it also spurred the adoption of new innovations, forcing years worth of change within months. In the past year, the use of contactless payments spiked, and adoption of on-demand delivery and buy now, pay later services also skyrocketed.
None of these were new concepts, but they aligned closely with urgent consumer needs during the pandemic and therefore thrived.
Contactless Payments Are Here To Stay
With the onset of the Covid-19 pandemic, swiping a physical card or handing over actual cash became suddenly much less desirable as consumers looked to minimize every possible exposure to the virus. In a recent Marqeta survey, 63% of consumers said that they didn’t believe physical money to be sanitary, with 80% believing that contactless payments are a safer way to pay.
In light of these apprehensions, consumers turned to contactless cards and mobile wallets en masse. Looking at the Marqeta platform, contactless payment volume rose by more than 4x across the last 12 months. More than three-quarters (76%) of people surveyed by Marqeta said that the Covid-19 pandemic had increased their use of mobile wallets. This enormous level of growth speaks to widespread acceptance of digital payments.
As restrictions begin to lift amid mass vaccinations, it’s likely that consumers will continue to expect contactless payment options. Behaviors are difficult to change, but once they change, they are even more difficult to change back. Once you learn to use your mobile phone as your wallet, it’s hard to go back to bringing a stack of cards with you everytime you leave your home.
Buy Now, Pay Later Allows Flexibility in Economic Downturn
Consumer demand for Buy Now, Pay Later (BNPL) options like Affirm, Afterpay, Klarna, and Sezzle rose exponentially through 2020. The economic downturn saw many consumers turn away from traditional credit and keep their money in savings, looking to maximize their cash flow and flexibility when making purchases.
BNPL volume rose by more than 4x in 2020 through the Marqeta platform, with a major spike in use around Thanksgiving. In Marqeta’s recent survey, 74% of consumers who had used a BNPL service said they’d done so for the first time since the start of the pandemic.
BNPL solutions offer consumers a simple way to shop without breaking the bank. Consumers expect to be able to pay in installments in a secure and flexible way, and any retailers that haven’t introduced BNPL options do so at the risk of sacrificing sales.
On-Demand Delivery Brings Everything To Your Doorstep
As America shut down last March, millions of Americans looking to feed themselves safely turned to on-demand food delivery platforms. With consumers forced to stay home, grocery and food delivery providers rapidly became a lifeline for their customer bases, catapulting growth. Payment volumes through the Marqeta platform for our on-demand delivery customers rose by more than 3x in the six weeks after Covid-19 lockdowns began, and rose steadily again in September when pandemic fears sharpened again.
One year in, on-demand delivery volume remains approximately 3x higher than pre-Covid baselines. The pandemic made on-demand delivery services a staple in American households, but their continued popularity shows that the convenience and safety they offer may keep growth strong even after post-pandemic life resumes.
Our Path Forward
It’s clear that our lives look and feel vastly different than this time last year. As we’ve worked to adjust to a whole new world, new payments technology became essential tools to navigate a new reality. We expect that this coming year will show that the forces that shape our future economy are not just how much or what we are spending our money on, but the methods in which we prefer to pay.
The payments industry will move forward from the seismic shifts in behavior we’ve seen to new puzzles: how to make a card top of wallet, how to expand the on-demand economy to new product groups, and how the Buy Now, Pay Later space evolves in time. But the changes we’ve seen will impact the course of the industry for years to come. How merchants and payment providers adapt to these changes will have a key part to play in how they recover from the impact of the pandemic.
Vidya Peters is CMO of Marqeta.