Payments Industry and the Covid-19

European Covid-19 Survey Results Highlights

Over September and November 2020, Deloitte conducted interviews with clients across Europe, the Middle East and Africa to gather their views on the impact of COVID 19 on the payments industry and their strategic response. We surveyed 50 firms across 7 European countries (UK, IE, FR, DE, IT, ES, SA). 44% of firms surveyed were banks, building societies (mortgage banks) or other credit institutions. 46% were PSPs, technical service providers and trade associations. 10% were merchant acquiring banks, most were universal or predominantly retail focused, with a more limited number being focused on corporate payments.

COVID 19 is and will continue to accelerate transformation and adoption of digital payments with the 96% of respondents opining the pace of change has increased by as much as 3-5 years. Almost 60% of respondents expect up to a 30% reduction in cash usage when the pandemic ends as consumer behaviours toward adoption of contactless, digital and mobile payments are increasingly embedded. Surprisingly, Italy follows the same trend. Despite being traditionally a cash-based country, Italy saw ATM withdrawals decreasing by 20% until December 2020, while the total volume of transactions on Mobile Banking grew by 56%. Smartphone usage reached the PC for Digital Banking operations and Mobile Commerce is now worth 51% of the total eCommerce market. All the respondents expect cash usage will return to only 0-30% of pre-COVID-19 levels. This expectation is also due to Italian government’s initiatives, aimed at limiting the use of cash.

On an operational level, however, COVID 19 did not bring any disruption in the way the market operates. Despite moving to remote working, 68% of banks did not experience any interruption to services or major incidents and 58% of respondents agreed current fraud detection and prevention controls coped with increased threats from fraudsters during the pandemic. In parallel, COVID 19 had a limited impact on change and innovation too as few firms experienced material impacts to their ability to deliver change during the pandemic.

It does not mean that Financial Services firms will stop planning and executing digital transformation programs. In fact, 74% of respondents are enhancing their digital capabilities and customer propositions, from improving online banking mobile applications to expanding digital wallet offerings. They are also focusing on customer experience, providing more control to manage services and improving loyalty and rewards. Furthermore, 20% of firms are strategically focused on open banking related offerings with a majority anticipating open banking propositions to become a focus in 12-18 months.

Like their European counterparts, Italian banks are eager to innovate. Banks are accelerating the transition from paper-based instruments to digital tools through the acceleration of remote dialogue solutions with customers, new digital identity, digital onboarding and the automation of internal processes. Half of respondents are oriented to alternative digital payment methods and to offer several digital services and experiences. They expect to achieve these goals setting partnerships with fintechs, launching new VAS and promoting Big Data fields. Italian Banks are also aligned to the European ones on the role that AI and analytics will play in the digital evolution. AI-services, in fact, are seen as the most prominent solution to evolve fraud detection and onboarding process, helping customers to identify the best offer on the market.

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