The Coronavirus (COVID-19) has resulted in a significant speeding up in the move away from cash, as consumers and retailers tried to avoid handling it, particularly in the early days of the pandemic. This has therefore been providing strong impetus for contactless payments, seen as a hygienic means of paying for goods and services, as well as further strong growth in e-commerce, with consumers locked down for extended periods in their homes or trying to avoid public places during the pandemic.
The COVID-19 pandemic had a major impact in 2020, with consumer payments seeing their first significant decline since 2009, when the after-effects of the 2008 financial crisis were still being felt. Both consumers and retailers were trying to avoid using cash, switching to card or contactless payments. Consumer payments will return to positive growth in 2021, albeit remaining below pre-pandemic levels. M-commerce has continued to boom during the pandemic.
Credit transaction value recorded a steeper decline than debit in 2020. Debit cards are generally preferred for replacing small-value cash purchases when making contactless payments. In addition, the pandemic’s economic impact in 2020 meant that consumers were a little more reluctant than usual to rack up more credit on their cards and were generally sticking to smaller, more essential purchases. In spite of the continued presence of COVID-19, more of a sense of normality has been returning in 2021, helped by widespread vaccination programmes, with credit cards expected to outperform debit in this year.
The dynamic growth of m-commerce continues unabated in Western Europe, driven by the rise of contactless mobile payments and the increasing use of the smartphone as a shopping device. While some countries, such as Sweden or the UK, are particularly advanced in this area, adoption even in cash-dominant countries is also accelerating, with further impetus provided by the pandemic.
The Revised European Payment Services Directive (PSD2) and the European Payments Initiative (EPI) are likely to help drive changes and new developments in Western Europe’s payment landscape in the coming years.
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