The pandemic changed the payments game but not in the way you think

The past two years have represented a seismic shift in the patterns of both our working and personal lives. The pandemic has impacted many aspects of our lives and accelerated pre-existing trends in how people work, consume and live.

For businesses in particular the pandemic was touted as the beginning of a payments revolution, shifting the norm from in-person to online sales, driving SMEs and corporates alike to the virtual marketplace.

Whilst we can´t deny that the global impact of COVID-19 has been profound, research from Barclaycard Payments shows that this revolution of a one-track system of online sales has not materialised yet. Instead we are witnessing the movement towards a more diverse payments landscape, where in-person sales continue to play a vital role alongside new technologies and emerging payment trends such as digital wallets.  

This is not to say that online sales were not boosted by the pandemic: larger corporates secured roughly 80 per cent of their sales through online interactions in 2020, with just 10 per cent face-to-face, a clear consequence of extended lockdowns. For the market at large, ecommerce has grown significantly between 2019 and 2021, with online sales growing from 25% to 38%, indicating a considerable shift in attitudes among both businesses and customers.

However, following the lifting of pandemic restrictions, face-to-face sales have experienced a bounce back. In 2021, 52% of payments were made face-to-face compared to 38% through eCommerce.  This comeback has been witnessed most markedly among SMEs which have a higher dependence on face-to ­face sales than larger corporates – 66% of sales compared to 23% via eCommerce. Indeed, only 56% of SMEs have an eCommerce capability. Despite the speculation, in-person transactions at shopping centres, farmers’ markets and corner shops are very much here to stay.

Rather than a perceived homogenisation, we are seeing increased diversity in the ways people choose both to pay and take payment, with the pandemic triggering the beginning of an enhanced willingness to adapt to new technologies.

For example, 2021 saw the continued trend toward contactless forms of payments, with digital wallets accounting for 30 per cent of sales and contactless cards for 24 per cent, while conventional cards and cash trailed at 21 per cent and 17 per cent, respectively. Remarkably, the acceptance of digital wallet payment has almost reached the same level as cash, underlining the magnitude of the changing attitudes we have seen in recent years.

Yet despite the overall trend toward contactless and digital payments, consumers continue to value choice, an attitude also replicated by businesses. A parity of SMEs and corporates have adopted app payments, standing at 30 per cent across both categories, indicating that businesses of all sizes are looking to an omnichannel future. However, it is vital that SMEs continue to adapt to changing attitudes, with just 56 per cent accepting online payments compared to 89 per cent of corporates; strengthening these online channels should be a priority for many small businesses as choice continues to become an expectation of consumers.

Within the overall rise of eCommerce, we are also witnessing several trends which we expect will continue into the coming years. Many consumers are already familiar with Buy Now Pay Later (BNPL), particularly within the fashion retail sector and among younger consumers. While BNPL constituted just a small proportion of sales in 2021, businesses are expecting a surge in popularity as consumers opt for more flexible ways to pay, with over 80 per cent expecting demand to increase within the next 12 months.

A new fintech innovation, Open Banking technology, is also set to dramatically change the financial services sector by offering providers greater visibility on customers’ current accounts. In fact, there are already other exciting applications arising from Open Banking – such as virtual cards. For example, Barclaycard Payments has just launched Precisionpay Go, a virtual corporate card that enables employees to pay for ad-hoc business expenses. With the addition of Apple Pay, Precisionpay Go allows employees to make in-store payments – all without the need for a physical card. Available in 102 countries, Precisionpay Go removes the time taken to fill in expense forms, and centralises the process for finance teams.

These opportunities presented by new technologies are expected to lead to a new generation of digital payment experiences and will no doubt come to the forefront in the foreseeable future.

It is clear that the future of payments will hinge on diversity and choice as both consumers and businesses continue to value flexibility and options. While the pandemic undoubtedly changed the way we pay, it did not result in the dominance of digital, but instead opened the door to a diverse and innovative landscape. With the storming return of in-person sales and a growing willingness to adapt to new technologies, what we are witnessing is not a revolution but an evolution.