Home 2020 Rebooting the Global Economy in the Post-Coronavirus Crisis

Rebooting the Global Economy in the Post-Coronavirus Crisis

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$V, $MA, $SQ, $PYPL, $JPM, $C

As important as the management of the ongoing health crisis is, getting economies up and running again as we emerge from lockdowns will help mitigate the long-term impact on people’s livelihoods is bigger.

Payments operators can help business activity to resume in the shortest term while they realign their efforts to ensure an accelerated return to full activity.

This means supporting customers.

This will also require adjusting services, adapting operating models, and reviewing the industry structure with an eye to support a reshaped economy.

To provide some relief to vulnerable businesses, many transaction banks are waiving transaction fees and tenor-of-trade finance facilities temporarily. Similar measures for fees can be taken in retail payments too.

Money remitters can launch alternatives to traditional cash payouts for receiving funds, especially as remittance counters are likely to remain closed in the early stages of the economic reboot. This could bring on a new use for the remitters’ increasingly underutilized ATM networks.

Some customers are skeptical of traditional paper currency as a result of the health risk it could carrie, and its use may not rebound when lockdowns end.

So, with ATM use down significantly in many markets, providers can reconsider how machines are utilized instead of just discarding them.

Underutilized ones might be repurposed for tasks such as opening accounts, verifying identification, or delivering public documents that would normally require face-to-face contact in the bank branch.

A rebooting economy may need to deal with social distancing, increased sensitivity to security, and accrued risk awareness for some time to come.

Even after the end of government enforced health-safety measures, retail banks and payment companies will consider long-term adjustments to their operating models.

As this health crisis plays out, there will come clarity about the depth and duration of the pain.

This is clear, there will be no return to the norms of Y 2019, as the impact on the behavior and expectations of customers and businesses will be profound, Bruce WD Barren, Chairman of EMCO Hanover Capital Group said in a telephone interview late Wednesday

So it is Key+ not only for the payments ecosystem, but also for the economy as a whole to develop, now the payments solutions that will allow economies to emerge from this health crisis efficiently and define the post-COVID-19 coronavirus future.

This is what is happening now, scary…

  1. Physical means of payments, such as cash and checks, have been actively discouraged through the crisis for their potential of carrying the virus. Banks have closed branches for security reasons, and clients and staffs have readjusted to changed interaction models, either over the phone or by appointment only. Some branches will never open again.
  2. The health crisis is highlighting the fact that not everyone has the same level of access to the necessary new technologies and digital tools. Moving away from cash affects unbanked citizens disproportionately. Merchants without access to digital payments lose out more as remote buying increases. Setups are being designed where all merchants and all consumers, irrespective of finances and education, will have access to the tools of the digital future.
  3. With values collapsing and trust eroding, digital currencies have proved incapable of delivering on their promise of a universal payments solution in a time of need. This health crisis is reinforcing the importance of governments in maintaining the global financial system. Consider, for a moment the momentous currency swap lines of credit made available by the Fed to global central banks.
  4. The growth of online commerce has sped up and will continue. Some small retailers forced to close in the crisis may not reopen physically, but seek a digital future instead. The rapid build-out of omni-channel capabilities, which will bridge payments in any environment, physical or digital will become an essential requirement for all payments players in most geographies.
  5. The fear of contact with contaminated surfaces has given a real boost to the use of contactless payments, card and wallet based. Cashiers are being trained not to take cards from customers and to promote the insertion of cards into readers by customers. As this behavior becomes further engrained, it will become the Key to removing barriers to growth.
  6. Payments using digital devices such as Smartphones or wearables started to emerge before the COVID-19 coronavirus happened. Enabling wallets to offer other features, such as digital IDs and transaction monitoring and reporting, will promote even more growth. Companies that provide viable options for integrated and contactless payments, to both customers and merchants, will have a distinctive edge over competitors.
  7. The COVID-19 coronavirus crisis opened new uses for data. In Europe, consumers are open to the use of data for their own benefit than in the US. The protections against fraud that can be developed should benefit users, not providers, in the weeks when activity resumes. Benefits delivered then will carry the mindset change forward. Fraud prevention is likely, more than ever, to be the priority.
  8. This worldwide disruption of our societies is triggering a new wave of innovation, with a cooperative mindset not seen in past crises. The liquidity and profitability crunch provoked by this health crisis will lead to a shakeout in the fintech industry, eliminating initiatives that lack clear long-term economic viability. Shayne Heffernan, PhD, Knightsbridge Group’s Chairman declares that this development will lead to a new fintech landscape, geared more to marketwide cooperation and Win–Wins and less to challenging the incumbents. “Given the change in valuations and market expectations, market consolidation and the development of local and regional champions may continue. In that context, companies will also be reviewing their prospects for growth, as well as considering partnership models and organic and M&A growth, to support their strategies,” he says.
  9. Banks will also have to readjust to this new model. Today, payments are a major cost for many banks, and most spending maintains existing systems instead of creating change. In this post-crisis world, banks must reflect on how to organize for change, possibly by running some of their payments businesses in a completely different way. They could consider structural moves on the use of onshoring Vs outsourcing, cloud-based infrastructure, automation, and analysis-driven decisions to reimagine scale or the realignment of products. Payments-as-a-service business models are likely to get a boost, particularly where they can provide relief for reduced IT budgets.
  10. In this changing time, people must move to setups that solve real-world problems, guaranteed by regulators but not imposed. This will require a new model of collaboration between the payments sector and regulators, a model focused on innovation in payments, adapted to the new economic reality in a sustainable and resilient way. Early indications see the Fed, the FDIC, and the OCC announced on 27 March, that they will allow companies to delay the adoption of CECL (current-expected-credit-loss) standards on regulatory capital for 2 ys. This will support lending activity post- COVID-19 coronavirus while maintaining the quality of regulatory capital.

Along this path, managing the immediate threat to people’s health and well-being is of the highest priority. So we do not expect these reforms to happen right off the bat.

But it is important to balance short-term health crisis management by thinking ahead to the restart of the economy and preparing for the new normal should this crisis be or really become the evolutionary disaster it is being made out to be, 1 where everybody is afraid of everybody else except family and very close friends and associates. Feels reptilian to me.

Thinking ahead with innovation may allow business to exit the crisis with a more customer-focused, efficient, and healthy payments industry.

Have a healthy day, stay home!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.