Weekly News Digest 22 May 2020

Pandemic leads to uplift for POS innovators, with PayPal embracing QR codes and BNPL surging

At this point, it might be fair to say that one of the few beneficiaries of the coronavirus crisis has been contactless payments. PayPal, which has performed extraordinarily well during these difficult times, has just announced that it is rolling out a QR code feature across 28 markets, including America, Britain and Hong Kong. To incentivise initial uptake, the firm has opted to waive transaction fees during the pandemic period, making it an attractive option for SMEs that are feeling the pressures of the crisis. The obvious benefit of the QR code function is how cost-effective it is to implement for merchants, but it can also help keep merchants and consumers safe from biological contact. "While QR code payments are not yet that popular in more developed markets such as the UK, PayPal's 2019 acceptance into the Chinese market and its presence in the likes of India means that QR codes will be integral to its growth", notes Lorna Baek of Verisk Financial Research.

While the United Kingdom has long seen cash usage falling, with debit cards overtaking it as the most popular way to pay since 2017, the coronavirus crisis may quicken the demise of cash. The elderly, long a stalwart of the physical form of payment, are even foregoing it now as Lloyds subsidiary Halifax has reported a 63 percent increase in the number of over-65s registering for online banking and an increase in contactless use. Neighbouring Ireland has seen a spike in online shopping – another death knell for cash – which is also predicted to become permanent. With over 35 percent of people now shopping online at least weekly, an Irish banking industry survey found that 31 percent claim they will keep up the habit even when lockdown restrictions are lifted.

Buy now, pay later (BNPL) is continuing its push into a prominent role at the point of sale. As e-commerce becomes a fast-growing alternative to currently impossible or risky bricks-and-mortar shopping, many consumers are opting to shop without immediate payment pressures. Australian BNPL sensation Afterpay – launched in the US two years ago – has attracted nine million users, with one million joining in the past ten weeks alone. In Germany, where the lockdown has been greatly eased and many stores have reopened, Klarna has seen a 50 percent increase in the use of its card at the physical POS. Online retailers too have had their interest piqued by the alternative payment method, which has the potential to prevent consumers abandoning virtual carts by offering cheap financial flexibility for their purchases. BNPL could be a ticket to a faster recovery in retail.

Joining a growing list of major corporations, American Express has informed its employees that they should make plans to be working from home for the remainder of the year. The plan is to introduce a phased return to work for its 64,000 employees, with those who cannot work from home being prioritised for a return. The remainder of the plan outlined by CEO Stephen Squeri gives us a sense of the transformed reality in store – lowered occupancy in offices, spaced seating, coordinated movement, visitor restrictions, face coverings, scheduled elevator use, health screening and symptom monitoring. Interestingly, Mr Squeri also notes that the company has become more "agile, flexible and less bureaucratic" as a result of the necessarily rapid adjustment to work-from-home situations. With tight profit margins in banking and payments, a permanent shift of this kind should be helpful in the push to decrease operating costs.

In a bid to better position itself to compete, Sony has opted to take full control of Sony Financial. The group offered shareholders 26 percent above the listed price per share to reclaim the outlying 35 percent ownership for a total of $3.7 billion. The unit accounted for approximately 15 percent of the group's operating profit in 2019 and has proven to be a stable source of revenue through the years, which may be part of the reason for the purchase: stability has a strong pull in the current climate. How Sony intends to position the wholly owned unit remains to be seen, but, as one of the firm's largest-ever strategic moves, there must be big plans afoot, particularly if Sony wants to be effective in the highly competitive Asian fintech environment.

To end, links to some other stories of interest this week...

EU: Open Banking users may double by 2021
Global: Boom time for payments companies
US: Instagram shopping gets new Facebook Shops feature
US: Stimulus payments via Visa-branded prepaid debit card