The COVID-19 pandemic resulted in a digital technology surge brought about by social distancing protocols and nationwide lockdowns. Businesses and consumers increasingly went digital to adapt, and now there's the normalization of remote work, virtual events, and online media.
The pandemic also brought about a drastic shift to online shopping, which is unlikely to dwindle even during recovery. The United Nations Conference on Trade and Development saw strong ecommerce trends across borders, with consumers from developing economies contributing the most to this shift.
The shift to online shopping allowed non-cash and digital transactions to prevail as consumers' preferred means of payment. Digital payment methods were already gaining traction even before the COVID-19 pandemic. Still, they were only fully utilized when stores were forced to shut down, and consumers had to purchase most of their needs online amid the virus.
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Here is an excerpt on the increased use of digital payments from the Global Fintex Database by the World Bank Organization:
"In low and middle-income economies (excluding China), over 40% of adults who made merchant in-store or online payments using a card, phone, or the internet did so for the first time since the start of the pandemic. The same was true for more than a third of adults in all low- and middle-income economies who paid a utility bill directly from a formal account.
"In India, more than 80 million adults made their first digital merchant payment after the start of the pandemic, while in China, over 100 million adults did."
So, what is digital payment? Forbes Advisor defines digital or electronic payments as "payments done through digital or online modes, with no exchange of hard cash involved. It is the transfer of value from one payment account to another, where the payer and the payee use a digital device such as a mobile phone, computer, credit, debit, or prepaid card.
Ways to Transfer Digital Payment
- Biometric authentication: This digital payment method requires biometric authentication—fingerprinting scanners, iris recognition, heartbeat analysis, and vein mapping—to prevent identity theft and fraud.
- Mobile point of sales (MPOS): Serves like a cash register, but in the form of tablets, smartphones, or other wireless devices with an app and a card reader to process payments.
- Contactless payments: Various ways of contactless payment equipped with near-field communication technology (NFC) are used today. Some mobile payment apps allow consumers to purchase, transfer money, and pay bills with a tap of a finger on their phone. It's faster, safer, more efficient, and more convenient than swiping a card.
- Digital wallets: One of the ways to make contactless payment is by using a digital wallet, which is the most popular payment method today. This payment trend requires the customer or merchant to link their card information to their mobile phones so they can transact without using a card.
- Social media payment: Social media networks have added payment solutions, such as paying from one user to another, from consumers to retailers, or directly within the network to buy items. This payment method is popular among millennials.
The Benefits of Digital Payment
With the numerous developments in digital payment, merchants may want to consider some of the benefits of having digital payment for the business. Generally, this eliminates a lot of the hassles with cash payments, and consumers will likely purchase from a store that offers flexible payment options.
- Allows merchant and customer convenience
The most obvious benefit of digital payments is the convenience for merchants and consumers. Digital payments are faster than traditional cash or cheques. There is no limit on where or when consumers can make the payment since they can access funds through their mobile phones or tablets. Digital payment systems also eliminate the need to go to banks, so there will be no need for lines and queues.
- Reach more customers and meet their demands
An increasing number of consumers are embracing a multi-channel shopping experience through online, in-store, and direct mail. A multi-channel presence allows businesses to reach and sell to more consumers, meet their demands, and increase the chances of getting more patrons. The good news is that online or off, digital payments are available.
- Increase productivity and profitability
Businesses can save a lot of time and effort in digitalizing transactions. Convenient online payments reduce—if not eliminate---the tedious tasks of data entry, processing paper invoices, and resolving customer disputes. Accepting digital payments also reduces operating costs, making it easier to manage trade contracts, delivery records, and accounts receivables. The merchant will have more profit to allocate to other aspects, such as improvement of systems and training their staff.
- Secure transactions
Merchants and consumers still hesitate to employ digital payments because of theft and fraud. However, electronic payment providers and systems already have multiple ways to secure transactions, like payment tokenization, encryption, Secure Socket Layer (SSL), etc. Employees also benefit from digital salary payments instead of manual cash payments, which can be easily stolen or misallocated.
- Allows merchant and consumer transparency
Digital payments lessen human errors on both the consumer's and merchant's end. It facilitates record keeping and creates an easily trackable invoicing process that can decrease document-related fraud.
An automated method of receiving and tracking payments provides more control over outgoing cash flow than the manual process, which gives everyone peace of mind regarding funds.
More Than an E-commerce Trend
The demand for online payment methods continues to rise as more businesses build a presence in the e-commerce space. Enhanced security, faster and more convenient payments, and premium facilities are just some benefits of digital payments for the business. There is an appropriate payment method for everyone, and it is still possible to accept both cash and digital payments. It all boils down to studying each payment method and understanding how it can be applied to your business.