The COVID-19 crisis has hit everyone — often on multiple fronts.
For many, the only thing as scary as the pandemic is the economic side-effects.
And, unsurprisingly, this is causing major shakeups in the world of payments.
And, while much of the news is bleak, there are some notable silver linings.
Daniel went over:
- How the hard-hit travel industry is responding
- The issues with remittances in the current climate
- The good news coming out of the industry
Trends in travel
With international lockdowns, social distancing and countries closing their borders, COVID-19 hit the travel industry hard almost as soon as the crisis began.
So, it’s perhaps unsurprising the travel segment is down something like 90% — possibly even more.
For many in the travel segment, the main driver of revenue is interchange fees. And the interchange income for people who rely on it has been devastated.
Similarly, newer digital banks and fintechs have recently been launching multi-currency card and wallet products that have been relying almost exclusively on small value travel use cases, which have been all but wiped out.
Daniel says the only positive he sees in the travel segment is that it was hit the fastest and heaviest. He hopes this means it will be one to slowly recover from the crisis, albeit not all at once and possibly over the span of a few years.
The trouble with remittances
Remittances have been greatly affected by COVID-19.
And there is some precedence. In the last recession, remittances fell by just over 5% and an even smaller amount in the 1999 recession.
But what was different about both of those instances was that the recessions were much more specific to individual countries and segments of the market.
There is some variation in how hard various types of remittances have been hit, but very few have avoided it.
Understandably in an era of social distancing, some of the groups impacted most in the crisis are those focused on in-person remittances.
There are also markets heavily reliant on oil to drive business, like the Gulf States and Russia, which are important sources of remittances, suffering under both COVID-19 and the added pressure of the crashing oil markets.
Still, some digital-focused remittance players are seeing a natural increase in their customer base as people seek alternatives to sending money.
And there are other silver linings, too.
The silver linings
While much of the landscape looks bleak, there are some bright spots.
Along with digital remittances, other digital-oriented brands are seeing customer acquisition rates soar as the crisis forces people accustomed to in-person transactions to think differently.
Of course, even though the recovery across multiple segments looks like it’s going to be pretty sluggish, there are still questions that need addressing before these companies celebrate any long-term victory.
Perhaps the most important question is: How many of these newly acquired customers that need digital right now will still want digital when other options return?
It’ll be interesting to see how this shakes out over the next few years.
Another potential boon is for companies who are already either already set up to manage payments with China or are moving quickly into that.
The reason for this is that it appears China is recovering faster than other parts of the world. So it makes sense for companies — even some who have not had China high on their list of priorities — to now make sure they are able to handle payments back and forth from Chinese suppliers.
Finally, across multiple segments, there are clear opportunities to innovate.
In fact, it may be the most important silver lining to this whole crisis.
Historically, difficult problems like the one we are facing have produced innovative solutions — and there is no reason to believe this is any different.
Until next time!