{"id":95622,"date":"2020-06-18T13:40:48","date_gmt":"2020-06-18T11:40:48","guid":{"rendered":"http:\/\/beta.next-finance.net\/opinion\/covid-19-likely-a-catalyst-for-more-cashless-transactions\/"},"modified":"2020-06-29T10:22:57","modified_gmt":"2020-06-29T08:22:57","slug":"covid-19-likely-a-catalyst-for-more-cashless-transactions","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/opinion\/covid-19-likely-a-catalyst-for-more-cashless-transactions\/","title":{"rendered":"Covid-19 likely a catalyst for more cashless transactions"},"content":{"rendered":"

None of these trends are new. But the pace of change has likely accelerated by a few
\nyears and online payment providers are the winners. They benefit from the shift to ecommerce and tap into new revenue opportunities by leveraging their technology to
\nhelp traditional retailers in the transition to this new \u201comni-channel\u201d world.<\/strong> <\/em><\/p>\n

Generally, Covid-19 has led to an acceleration of the transition to cashless societies globally that should prove a net positive for all players despite the important shift of market shares to e-commerce.<\/p>\n

E-commerce is gaining traction<\/strong><\/p>\n

Almost two months of lockdown and store closures have led to a surge in online retail sales
\nglobally. Data from Bank of America suggest online represented around 30% of card
\ntransactions in the US in May – up from around 15% before the implementation of social
\ndistancing policies. Physical stores are going to re-open at some point but it is difficult to
\nquantify how much of this online shift will persist in the longer run. However, we do believe
\nthe change in customer behaviour created by the pandemic such as working-from-home is set
\nto have long-lasting consequences. For the first time, online retail has penetrated new age
\ncohorts (those 45 or older) and new product categories (groceries, health products, food
\ndelivery). Data from Nielsen shows that \u2013 in the UK alone – 600,000 households have tried
\nonline shopping in the first weeks after the lockdown was put in place. <\/p>\n

More importantly, penetration rate of e-commerce before Covid-19 suggests there is a long
\nrunway for growth. The share of online in retail sales is over 20% in China, hovers around 15%
\nin the US and UK but remains below 10% in Continental Europe and Japan. Overall, this makes
\nus optimistic that the pace of growth in the e-commerce market (low-to-mid teens before this
\nyear) is likely to get a long-term boost.<\/p>\n

Figure 1: E-commerce as a % of retail sales (2018)<\/strong> <\/em>
\n\"-903.jpg\"<\/a><\/p>\n

Omni-channel is the new norm<\/strong><\/p>\n

Beyond e-commerce, social distancing has favoured hybrid ways of buying, at the intersection
\nof online and physical retail. For example, a client may want to check inventory online for a
\ngiven product in different stores, pay for the transaction using his smartphone and then
\nretrieve the item a few hours later at his chosen location (\u201cclick and collect\u201d). Buying a product
\nonline but being able to return it in store (\u201cclick & return\u201d) can also be a popular option notably
\nin sectors like clothing.<\/p>\n

Arguably, the lines between physical and online retail started to blur a long time before the
\npandemic broke out. In 2016, a study from Deloitte found that the experiences of consumers
\non digital channels (online or mobile) actually influenced 56 cents of every dollar spent in
\nphysical stores. However, the stakes are even higher in a context where social distancing might
\nremain the norm for some time.<\/p>\n

Omni-channel might seem easy to implement in theory. But in practice, companies have
\nstruggled to provide their clients with a seamless and integrated experience across all
\nchannels, digital or physical. To push the right offer at the right time, merchants need a single
\ndata pool that collects information on transactions across all payment methods and across all
\nchannels for each individual customer. That has proven difficult to achieve given the
\nfragmentation of the current payment processing landscape with many retailers using different
\npartners for online and in-store payment processing for instance.<\/p>\n

Figure 2: Omni-channel is the next step in the digitalisation of retail<\/strong> <\/em>
\n\"-904.jpg\"<\/a><\/p>\n

How to access the theme<\/strong><\/p>\n

Winners of the migration to e-commerce are the online payment providers like Adyen and Paypal. The latter announced a record number of new account opening in its first quarter. The emergence of omni-channel provides these players entry into the traditional in-store payment processing market with in-store transactions still representing close to 80% of all payments.<\/p>\n

Adyen has gained some traction there with its unique technology that makes it possible for merchants to process all transactions in-store as well as online on the same platform. Both Adyen and Paypal are holdings in the financials strategy.<\/p>\n

Other holdings in the strategy, such as the more traditional payment providers Global Payments in the US, Worldline and Nexi in Europe also have a card to play in our view. Covid19 has led to an acceleration of the transition to cashless societies globally that should prove a net positive for these players despite the shift of market shares from in-store to e-commerce.