How Did the COVID-19 Pandemic Impact Cross-Border Payments?
With lockdowns and other measures to prevent the spread of the virus, the COVID-19 pandemic has drastically changed our everyday lives. While ATM withdrawals and cash usage decreased, interest in digital payments has grown significantly during the pandemic. People are increasingly turning to eCommerce shopping, with a 40% growth in online sales between May 26 and June 1 compared to pre-pandemic periods. With such dramatic effects, the pandemic also brought some major changes to the cross-border payments industry.
The Evolution of Cross-Border Payment Systems
Whether it’s a B2C or a B2B transaction, it’s not hard to see the inefficiency of traditional cross-border payment networks. After initiating an international transfer, your funds move through multiple correspondent banks before reaching the recipient. Due to the lack of direct transfers between the sending and receiving banks, traditional cross-border payments have high costs and long processing times. While the system’s issues could be observed in the pre-pandemic period, the coronavirus-fueled digital transformation has fostered the evolution of the cross-border payments industry, demanding (more) predictable international transactions from service providers. For example, SWIFT GPI — a new cross-border payment standard that allows financial institutions to transfer funds in a much faster and cheaper way — has seen a rapid increase in popularity among banks during the pandemic.
Surging E-Wallet Usage
With surging demand for cashless transactions, consumers are increasingly looking into e-wallets for digital payments. And this shouldn’t come as a surprise. As part of a secure ecosystem, e-wallet solutions integrate a wide range of payment methods that customers can use to transact funds conveniently and efficiently. STICPAY, for example, offers local bank wires to extend its global payments service with cost-efficient and fast transactions, making e-wallets a viable solution for both domestic and cross-border transfers.
Increased Cryptocurrency and Blockchain Adoption
Payment service providers have been already experimenting with blockchain-based solutions to allow faster and cheaper payments for their users. As a result of the pandemic’s effects, the global demand for cryptocurrencies has grown significantly. Both consumers and businesses realized the digital assets’ potential for cross-border payments and as a crisis-resistant store of value. Cryptocurrency prices have been following this surge in demand. Since March 13, Bitcoin and Ethereum have grown by 162% and 263%, respectively. Identifying the potential of cryptocurrencies, STICPAY implemented digital asset transactions into its e-wallet solution. Currently, STICPAY customers can use Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Tether (USDT) for crypto transactions.
Sources: Fintech Magazine -COVID-19 to accelerate use of digital payment technology The Asian Banker — Battle for cross-border payments will reshape financial services LiveMint — E-wallet transactions surge amid COVID-19 Fintech Business — Digital wallet use soars amid COVID-19 restrictions Raconteur -Are digital payments COVID winners? PWC — Impact of the COVID-19 outbreak on digital payments ET Tech.com — Covid-19 pandemic will drive adoption of digital payments: PayPal CEO Unissu — Effect of COVID-19 on Crypto and Blockchain Industry Government Technology — Is COVID-19 Accelerating the Shift to a Cashless Society? JLL — How the e-commerce boom during COVID-19 is changing industrial real estate Nayaxa — The Novel Coronavirus Could Mark 2020 As The Beginning Of A Global Cashless Society CoinMarketCap — Currencies Bitcoin CoinMarketCap — Currencies Ethereum
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Originally published at https://www.sticpay.com on August 27, 2020.
