The evolution of payments: What we’ve learned from the pandemic push to digitization

In today’s digital world, it’s hard to imagine a time when consumers and businesses could count their payment options on a single hand. Back in the 1960s, they could choose between cash, checks, wire transfers and an emerging payment option at the time – credit cards. Over the last few decades, the choices began multiplying, driven by consumer demand and new technologies that made things like online checkout, digital wallets and biometric payments possible. Then COVID-19 pushed the digital payment revolution into overdrive, accelerating the pace of innovation from years to months. Now the ways people can pay for what they need — and their appetite for new digital methods — seems almost limitless.

Compare consumer in-person transactions between the first quarters of 2020 and 2021: The contactless share grew by at least 50% in 100 markets, with Mastercard processing one billion more contactless transactions in that first quarter of 2021. And 63% of consumers said that pandemic led them to try a new payment method, according to Mastercard’s New Payments Index.

For many, digital payments are becoming an everyday habit. A whopping 84% of consumers expect to buy what they want, when and how they want, whether they’re footing the dinner bill via QR code, sending money via smartphone app to family members abroad, buying products online with crypto, or choosing to buy now and pay later at checkout. And 60% of consumers are now using digital methods to pay their bills, according to Mercator. Impressed by the speed, ease and transparency of digital transactions, they have no intention of stopping. Companies that do not offer these choices run the risk of losing business.

Behind the scenes, when companies transact with each other, payment advances have been moving more slowly. Before the pandemic, many companies were still paying with paper checks. Despite the fact that up to 90% of business-to-business suppliers in the Americas reported late payments by their customers, businesses had been slow to migrate to digital payments for fear of upending their existing business relationships and infrastructure. As of January 2019, nearly 60% of businesses had not yet implemented any type of payment automation, according to a Mastercard and PYMNTS study, though 46% said they planned to do so in the next year.

When the pandemic hit, those plans had to become reality fast. In the early days of the lockdown when companies sent workers home, invoicing and check-writing ground to a screeching halt. No one was available at offices to prepare checks or receive and deposit them. As a result, 82% of small businesses surveyed said they changed how they send and receive payments, and 51% pivoted their clients to digital payment methods, according to a Mastercard study.  

For businesses and consumers – it’s about choice

That’s why Mastercard has continued to expand beyond its core network that’s enabled secure electronic payments globally for over 50 years, to offer choice in all payment types. The game-changing 2017 acquisition of Vocalink, a leader in real-time account-based payments, was just the beginning. Since then, we’ve added open banking leader Finicity, advanced our bill pay capabilities with Transactis, Nets and Arcus, and earlier this year we announced a decision to support select stablecoins on our network. These are just a few examples of how we’ve brought to life a multi-rail strategy that empowers consumers, strengthens businesses and enables further innovation.

Consumers are already experiencing the benefits of more options for fast, simple and secure digital payments. And with the Track Business Payment Service, Mastercard is simplifying and automating commercial payments globally, with rich data exchanges helping streamline back-end operations for businesses large and small. Buyers and suppliers can pay with the methods they choose, using a single access point that doesn't require the company to adopt and implement multiple technologies. The technology reduces the risk of fraud as neither party needs to share sensitive banking information with each other.

These features and services help strengthen customer and company relationships, which can lead to more business. Companies can enjoy efficiencies like working capital improvement, visibility into the payment details, and more choices for customers to pay how and when they like.

That’s the one constant, driving force when it comes to payment innovation and evolution – the demand for choice. And that isn’t going to change in 2022. If anything, it will only get stronger.

Illustration by: Mona Chalabi