How the global payment market has changed through COVID-19
With the onset of the COVID-19 pandemic, we at Wirex have switched our teams to working remotely and continue to ensure the smooth operation of our product for our customers. During the quarantine, we’ve noticed dramatic changes, not only in the behaviour of our customers, but also in the global payment landscape. We’ve decided to share our thoughts and observations during these unprecedented times.
How coronavirus online payments have changed
In this new reality, cash has become one of the main threats to human life and health. Authorities are attempting to protect the population from further sources of COVID-19 infection in different ways — the Chinese government, for example, decided to disinfect cash with high temperatures and ultraviolet light, whilst the South Korean authorities simply burned some of the banknotes.
According to TransUnion, following the WHO announcement of the launch of the COVID-19 pandemic, the number of global e-commerce transactions increased by 23%. For the VISA payment system, contactless transaction limits have increased in Greece, Ireland, Malta, Poland and Turkey, whilst Mastercard has also raised its limit for contactless payments for purchases in 29 European countries. As such, billing operators have taken this step so that users do not have to enter a PIN at the terminal, thereby limiting contacts to potentially contaminated surfaces.
Wirex statistics also show a change in consumer habits. In general, according to our data, since the beginning of quarantine, the volume of transactions through in-store POS-terminals has decreased by 30%.
“The main tool for spending money in the physical world of Wirex customers is a payment card, so as soon as quarantine began and there were reports from the authorities of various countries about restrictions on the movement of people and their contacts, we immediately began to track card transactions. We have noticed a gradual reduction in card POS transactions and now in-store transactions have decreased by 30–35%. That is, users began to use cards by 30–35% less. Interestingly, this trend applies not only to Wirex, but to all card products in the world. Not only this, but since people are not actively withdrawing cash, we’ve also seen a decrease in transactions through ATMs, ” said Ruslan Kolodyazhny, CTO Wirex R&D.
According to him, the number of terrestrial POS transactions will continue to decline as people remain at home during this time. On the contrary, the number of online payments in the Wirex system has increased, but only by 10–15%.
“The relationship between POS and online transactions is not inversely proportional. This is because people are trying to spend less money because of the crisis, because there is also an uncertainty about what will happen next. As expected, the largest decrease in activity in POS-payments is seen in Italy, whom have been one of the hardest hit countries in Europe. There has also been a decline in Britain, Spain and Germany,” explains Ruslan Kolodyazhny.
How the coronavirus affected bitcoin and other digital assets
With these general changes in POS and ePOS transaction volumes, there has also been significant changes in the cryptocurrency space.
Due to the panic surrounding Coronavirus, investors were not only selling off assets in the stock market, which lost more than $5 trillion in the US alone. The same fate fell on the cryptocurrency market. In just one day, the market fell from $223.98 billion to $126.05 billion, and lost 43% of its capitalisation, whilst the cost of bitcoin fell from $7900 to $4400 during this day.
But after a large-scale panic sale, Google Trend statistics suggest that global interest in cryptocurrency has grown significantly — the $4400 BTC price was significantly more attractive for investors.
It is significant that along with the interest in cryptocurrency, the volume of cryptocurrencies available has also increased significantly. Therefore, the day after the collapse, additional demand returned to the market at $49.5 billion.
For those holding cryptocurrency but unfamiliar with trends, they will often believe a fall in the value of BTC reflects the collapse of Bitcoin, meaning they will actively sell their assets. Other more savvy investors, on the other hand, see this as an opportunity to make money and buy, explains the Head of Wirex R&D.
“What we have seen from our product and market, is that crypto exchanges often “go down” when there are high volumes of transactions in a given period. We ourselves also had some infrastructural difficulties, because at one point we had an extremely high number of active users, all of whom were making transactions at the same time. It should be noted that most transactions were associated with purchase, not sale. Having looked into this period afterwards, it showed that the amount of cryptocurrency stored in users’ accounts increased 2–2.5 times. People have been actively buying up assets, and in March, we had the largest number of transactions since the beginning of 2019,” says Ruslan Kolodyazhny.
According to him, Bitcoin, Ethereum and Litecoin are in the greatest demand amongst investors. Many users have also purchased the WXT token, a Stellar-based cryptocurrency that benefits Wirex users by offering them free transactions on the Wirex platform, and other additional reductions in fees. As expected with the recent cryptocurrency market fluctuations, the rate of WXT has also fallen, and so customers that are looking to make free transfers on the Wirex platform have purchased this cryptocurrency at a great price.
What will happen to the payments after the pandemic is over?
According to a study by the Bank for International Settlements (BIS), fears in how cash is being distributed amongst individuals during COVID-19 may result in the changing behaviour of people and businesses. Therefore, in the medium term, the pandemic could lead to both higher cash stocks of consumers and a structural increase in the use of mobile, card and online payments.
“I think more and more business processes will go online. This is another challenge for the banks, because it’s unlikely that people will want to go to banking branches and interact with people — everyone will try to limit human contact. For example, SEPA and SWIFT transfers are already taking longer than usual, i.e. no longer two hours, but more like two days. Aside from this, because of the disruptions to the classic payment infrastructure which have already been seen, people are already fearing about the ability of the banking system. As a result, more and more people are learning about cryptocurrencies and turnkey currencies — digital dollars and euros on blockchains, ”summed up Ruslan Kolodyazhny.
