As we mentioned in our article The Next 5 Years in Digital Banking the younger generation’s move towards online shopping has largely been driven by convenience, whereas for older demographics it’s out of necessity because of Covid-19. This was especially true for grocery shopping. Whilst online shopping automatically means digital payments, in the physical sphere there was also a trend towards cashless and contactless payments. During the pandemic many physical shops have promoted a preference for cashless payments, even going so far as to refuse cash for the health and safety of their employees.
A number of banks have increased the contactless limit on card payments, meaning consumers no longer need to enter a PIN for larger amounts. For younger generations who barely even use their cards for contactless payments because they are used to swiping their phones, the pandemic hasn’t brought them out of their comfort zone. But for everyone else, these changes, driven through necessity, have opened up a fast and convenient world that they didn’t previously have much experience with. This is only going to make digital transactions more common, even post pandemic.
These trends give small retailers two main problems. Firstly, those that only accept cash need to invest in a card payment system and this can be expensive with traditional providers. Those that put minimum spends on transactions by card are also expected to remove this obligation. Secondly, there’s now more of a pull for them to offer products online which also requires a system for processing payments. As low volume suppliers, small retailers don’t get the best deals when it comes to payment systems. However, with ever more acquirers entering this space and helping to bridge the gap between small merchants and card issuers, retailers now have the option to offer cashless payments without investing heavily.