Less Cash and More Electronic Payments: the Financial Changes That the Pandemic Brought

Reports indicate that the 2020 health emergency has increased the use of digital transactions while decreasing the use of physical money.
Less Cash and More Electronic Payments: the Financial Changes That the Pandemic Brought
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Entrepreneur Staff
3 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

For some time it has been predicted that, eventually, cash could fall into disuse to give prominence to electronic payments. Now, the COVID-19 pandemic could make these projections a reality.

Based on the trends seen in 2019 and so far in 2020, it is speculated that global cashless transactions will have an annual growth rate of 12% until 2023. In Latin America the growth rate will be 6%, according to the World Payments Report 2020 published by Capgemini.

The same report indicates that between 2018 and 2019, 708.5 billion digital transactions were recorded globally. This means a growth rate of 14%, the highest registered in the last decade. In 2019, the Asia-Pacific zone had the highest volume of cashless transactions: $ 243.6 billion, well above Europe and North America.

Such growth is a consequence of the increase in the use of smartphones , the rise of e-commerce and digital wallets. There are also innovations in QR code payments, led by China, India and other Southeast Asian markets. In that region, digital payments show a growth of 31.1%.

 

Fintech and neobanks: the new competitors

The report revealed that 30% of consumers are using 'Big Tech' for payment services and 50% are using neobanks to carry out their transactions. In April 2020, more than 38% of users said they discovered a new payment provider during lockdown.

 

 

Rafael Roncancio, director of Capgemini Financial Services Mexico and Colombia, commented that neobanks already challenge traditional banking for their growth and benefits. Fintech services can offer cheaper commissions because they do not have to invest in as many physical means (sucural, personal, etc.), which translates into lower fees.

One way to speed up the development of electronic transactions would be to enable payments via WhatsApp. This would help generate more confidence in digital transfer and have a greater reach of users, said Pablo Márquez, president of Capgemini Mexico and Colombia.

In Mexico, 60% of mobile users over the age of 50 claimed to use WhatsApp. The figure rises to 84.5% among respondents aged 18 to 24, according to a survey conducted by Statista from March to August 2019.

 

Present and future of electronic money

Internet banking and direct transfers became the preferred payment method during the health crisis, according to 68% of respondents.

Contactless payments   they ranked second, as 64% of those interviewed said they use them frequently. Digital wallets and QR code payments were the preferred means of 48% of the participants. Digital wallet users are expected to increase from 2.3 billion to 4 billion by 2024, that is, they would reach almost 50% of the world's population.

"The key for the industry to take these figures to the next level is to understand the needs, fears and expectations of customers (current and potential) to design experiences that are easy to use and understand, that generate the confidence and emotion necessary to motivate the mass adoption ”, pointed out Lulo López, General Manager at Frog México.

 

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