The full list of lives and industries changed by the impact of the COVID-19 pandemic will be collated for years to come, but one of the most obvious changes has been the pandemic’s impact on digital finance. Adopting a new COVID-safe normal has forced big changes for the industry that has seen ten years of projected digital change happen in mere months.
So how has digital finance shifted during COVID?
The anti-gold rush
This year has seen public engagement of digital currencies skyrocket, with 73% of customers having heard of the concept in 2020 as opposed to just 42% last year.
With the pandemic exposing traditional markets to volatility and uncertainty – investors and traders have started to seek alternative havens for their wealth. Previously, traditional hedging options for traders have seemed like a sure bet; holding value even as currencies and commodities fluctuate. However, a new kid is now on the block to rival hedging – with digital currencies emerging as a popular alternative.
According to the Eurasian Economic Review – the prices of many digital currencies surged in 2020, driven by the impact of COVID. As digital currencies are a non-physical asset, they are virtually transacted and stored – without being hampered by the COVID-19 restrictions on handling of cash and the closure of banks and businesses. Broadly, the currencies have also been largely protected from the issues which buffet the prices of commodities and global currencies.
Whilst online banking and contactless payments are two areas in which growth has been steadily increasing over the years, the pandemic has accelerated adoption of these technologies.
Closed branches and lockdown restrictions in Australia (and around the world) have seen the number of online banking users surge by 35%. The majority of this growth was seen among senior citizens and Baby Boomers, a market of users for whom digital adoption has always lagged. Across the globe, contactless payments have also grown by 40% , with surprise growth in areas that have been traditionally slow to adopt digital technologies, such as the USA, which Deloitte notes has seen growth of adoption by 150%.
A golden opportunity
Whilst COVID-19 has bought mandated changes outside of consumer control, there are some positive aspects to the economic shock for Fintech businesses. The clear need for rapid change and adaptability has made businesses much more willing to invest in and encourage digital finance and technology. Banks in Canada and the United States have been able to increase productivity by as much as 20% by streamlining services. Alternative payment companies like Stripe and PayPal have also recapitalised to offer more services. In late 2020, PayPal announced that customers will now be able to use digital currencies to pay for their products online, a huge change that will likely spur other large companies to do the same.
Bricks and mortar businesses are also looking to make changes, with many developing e-commerce stores in order to reach buyers no longer able to go to physical shops (https://shop.qoin.world/). In Latin America alone, more than 13 million new users made their first-ever online transaction in Q2 of 2020. This statistic equates to a decade’s worth of projected growth within two months of one year! A truly drastic increase caused by changing habits as a result of COVID-19.
The near future
The digital finance industry was perfectly poised to capitalise on changing habits during the pandemic because of its agility, enabling it to rapidly increase capacity and services in order to take advantage of changing consumer behaviour, from online shopping to the cashless transactions.
The question now is whether digital finance can maintain, or at least consolidate, these changes in user habits? While some will always prefer the ability to physically visit bank branches, shop in person and pay in cash, it’s a fair bet that many will shift gears towards the convenience that the digital finance world offers.