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Wholesale Banking

Corona crisis – trends that could impact your business

We’re a few months into the corona pandemic and global trends are emerging across all sectors that could have a marked and lasting impact on your business. What are they? And how can you best respond?

The crisis has accelerated many trends that were already evident, such as remote working, online shopping and tech-enabled retail. E-commerce has boomed during lockdown, triggering a rising need from consumers and merchants for safe, low-cost and easy-to-use electronic payment solutions. (Despite the spike in online sales, payments systems have proved resilient and there have been no reported outages of core infrastructure.) In Europe, the ECB is supporting this trend by aiming to foster pan-European market solutions for instant payments at both POS in stores and online.

Cash down, contactless up

There has been a clear decrease in POS transactions, both for cash and digital; McKinsey & Co. suggest these could drop by as much as 40% in the short term. At the beginning of April, the number of customers choosing contactless payments in the Netherlands had risen by 7%. Many retailers, especially in the food sector, are encouraging self-checkout, and despite attempts at sterilisation (using ultraviolet rays, ozone, or heat treatments for example), the use of cash is declining. And as companies develop new business models to support digital payments, and new customers embrace e-commerce for the first time, (like 55-plussers ordering food and other services online), there is a chance that the use of cash may not rebound.

Contactless payments, with their perceived hygiene security, are rising strongly, and the crisis has accelerated the move that was already evident to transactions using mobile devices and digital wallets. This could be further promoted by enabling other features such as digital IDs, transaction monitoring and alerts that tell customers when they can pick up shopping; such capabilities could make a difference to the reopening of certain stores.

Becoming shock-resilient

In a world where for many, working from home is becoming the new normal, threats to cybersecurity are rising and corona-themed phishing campaigns are spreading. This has prompted some food retailers to set up virtual ‘nerve centres’ to address primary threats rapidly and mitigate their causes, as well as stabilise stakeholder management; the same food retailers are witnessing declines in sales in some store formats such as convenience. Other ways businesses are responding to the pandemic to ensure an efficient and shock-resilient future include adopting machine learning to spot abnormalities and adjust immediately; diversifying sourcing to reduce risk; equipping merchants with the tech tools to operate remotely; and transforming head offices into flexible, remote-working teams supported by tech and data.

New initiatives

Crises typically trigger new avenues for growth, and while many businesses are struggling, the smarter ones are exploring profitable ways to reboot, like reshaping their ecosystem by forging new partnerships, often in sectors different to their own.

In addition, initiatives from ING and other banks are reducing the impact of lockdown. ING’s app is a boost to customers since it promotes contactless payments, and the bank has also temporarily raised the limit for a single transaction without pincode in many countries; in the Netherlands for example, it has shifted from 25 to 50 euro. In addition, the cumulative limit, for transactions made after each other, without demanding a pincode, has been raised to 100 euro.

Looking elsewhere, Spain’s CaixaBank has launched technology that enables them to sell over social networks and messaging apps, and the UK’s challenger Starling Bank is giving a second debit card to people who are self-isolating that allows someone else to spend on their behalf.

Disrupted supply chains

Supply chains are being disrupted as corona-related regulations cause restrictions on the movement of goods and many merchants are looking at sourcing locally. While there is a definite shift from B2B to B2C (partly due to increasingly localised commerce ecosystems such as those promoted through buy-local campaigns), cross-border B2C transactions see a decline because of the disruption to travel and tourism. Cross-border B2B transactions have also been affected and container freight has dropped considerably since January. This disruption to supply chains – encouraging a move to local – will continue long-term as countries emerge from the crisis at different times.