The coronavirus pandemic has not only accelerated a shift to contactless payment methods around the world, it has also made the offer of so-called neo-banks look increasingly attractive.
Before the pandemic struck, an increasing number of consumer-business transactions were already taking place online (in the UK, for example, 20% of retailer sales were online in February; by May that had risen to a third), and more in-person purchases were being done via contactless.
For many small businesses, online payments have meant they are able to stay afloat during challenging times. The American financial services company Stripe began processing payments for more than 100,000 new small businesses between March and June, the Financial Times reports.
“That huge jump is testament to the need for that movement to happen quickly and seamlessly” at the start of the pandemic,” Ellen Moeller, EMEA head of partnerships at Stripe told the FT.
The question for many small businesses now, though, is are the advantages of digital payments worth the extra associated costs? Moeller says that so far, as major lockdowns have eased, a lot of businesses have stayed with Stripe.
Within shops, meanwhile, cards have become king. Tyl, a payment-processing business begun last year by the UK’s NatWest bank, says 70% of new clients this summer were businesses that had previously accepted only cash. A mere 40% of new businesses were in this category before the pandemic.
But the FT notes that regulators say small businesses, in particular, have sometimes faced excessive fees for providing payment services. The fact is, though, consumers are increasingly seeing the value of digital payments and that may well leave those businesses with little choice but to continue offering the service.
Indeed, in Australia, market research company Roy Morgan has published research detailing how a consumer-driven revolution is under way in the banking and finance sector, driven in the main by an influential, five million-strong group of consumers dubbed “NEOs”, those belonging to a “new economic order”.
They are tech-savvy quick adapters, and when it comes to banking, 64% of NEOs say, ideally, they would like to conduct all their banking without ever having to go to a branch, and 80% prefer to bank digitally.
Roy Morgan reports that new digital-only banks, known as neo-banks or challenger banks, hit the sweet spot for this group of consumers. Established banks cannot afford to be complacent, say the authors of the report.
Neobanks are still relatively few and small in reach, but NEOs are flocking to them. “While the Big 4 banks collectively average 25% of NEOs as a proportion of their customers, Roy Morgan data shows that as of March 2020, almost half (46%) Australia’s neobank customers are NEOs.
Sourced from Financial Times, Roy Morgan