Payments and COVID-19: Mastering the Dilemma

Andreas Pratz Partner, PwC Strategy& (Germany) GmbH 23/04/20

Amongst all challenges – health-wise, societal and economical, the payments industry looks like one of the few sectors in high demand in the current COVID-19 pandemic. As of last week, 29 European countries have increased their contactless limits, demand for mobile payment services has doubled in some cases and there is a controversial discussion about the perspectives of cash in an industry vowing for cashless. Yet are things so simple?

COVID-19 will structurally affect the payment industry

Considering both sides of the coin

A preference for contactless and mobile payments in shops, and the uptake of e-commerce during the lock-down probably constitute a 2-3 year leap in shopping and payment behavior. But it is a bigger piece of a smaller cake. Danske Bank, founder of the country’s leading mobile payment system, has published some of the more detailed data on how these shifts have been playing out (only) within the first week of lock-down in Denmark (announced on March 11, data up to March 17): Whereas grocery spending and health spending went up (20-90% over the same period in the previous year), other areas went down significantly between clothing (-40%), transportation (-60%) or cinemas (-90%).

Two other factors are key driving forces affecting the payments industry in its entirety: Global travel capacity is down by 80%, and cross-border transaction flows are heavily impacted.

Disruption in all segments

Different to previous crises, the COVID-19 pandemic affects all players. Consumer banks see their card revenues affected considerably, business banks and merchant services suffer with their customers in retail, hospitality and independent professions, transaction banking from reduced international payment and trade flows, and card schemes or alternative payment methods see reduced international shopping and payment volumes. Processors in the payments industry are probably least affected, and positive “islands” remain limited to e-commerce payment service providers seeing rapid uptake of new merchants or mobile payment methods that solve for cashless payment options also in person-to-merchant situations without major hazzle. But even there the picture is mixed, as the Chinese mobile payment giants witness.

Revenue pools of all payment players affected

Short- and long-term positioning required

We see six imperatives for the payments industry in the current situation, both specific to this pandemic and resulting from the economic effects on consumers and businesses:

Six major business model implications
  • Short-term: banks and the payments industry should strive for a balance of enabling Cashless / Cardless / Contactless whilst supporting consumers and business in ‘making ends meet’
  • Mid-term: an urgent strategic challenge for many players in the industry is the upgrade of traditional propositions to true e-commerce and omni-channel offerings on all sides, for payers and payees; this goes along with a need to review the positioning of wholesale and transaction bank offerings, where we expect to see a renewed quest for partnering across Europe both geographically and in certain services
  • Long-term: it will be important to balance the calls for Central Bank Digital Currencies with the ability of the commercial banking system to produce credit; and clearly some players will already be preparing for M&A in payments by now – seeking advantage from the cashless leap, reduced asset values and opportunities for investment that did not exist a few months ago


Holger Ackermann, Mischa Koller, and Remo Dominioni have also contributed to this article.

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Andreas Pratz

Andreas Pratz

Partner, PwC Strategy& (Germany) GmbH

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