Simon De Broise, Senior Associate at Collyer Bristow, examines the likely impact of the acquisition on the two companies and the financial sector as a whole.
The UK Competition and Markets Authority recently cleared the global card network Visa’s acquisition of Plaid, a US-based fintech, whose primary business is to act as an ‘aggregator’ in the payments sector. The deal, first announced in January of this year, is another interesting tie-up between a fintech and one of the established card networks, and the jury is out on whether this move will help or hinder the open banking movement. The acquisition comes at a somewhat difficult time for Visa, as we recently learned that it is being investigated by the European Commission after complaints of anti-competitive behaviour from e-money providers.
Plaid’s aggregator business provides third-party apps and financial institutions with secure access to consumers’ bank accounts, either by means of the aggregator entering into Application Programming Interface (or API) agreements with the consumer’s bank or by managing the consumer’s banking login details directly (a method that banks are now clamping down on for obvious security reasons).
The benefits of this deal for Plaid are plain to see. The aggregator market is competitive and the issuing banks (i.e. those ultimately sending payments from consumers’ accounts) are in a strong position to decide how and when, and with whom, they do business. For instance, the ‘scraping’ of consumers’ online banking details by aggregators for use with other institutions is increasingly considered by banks to be unnecessarily risky from a data security point of view. This means aggregators entering into an API agreement, which are notoriously difficult for aggregators to negotiate, and so the tie up with Visa is likely to put Plaid in a much stronger negotiating position when it comes to doing business with the large retail banks.
The aggregator market is competitive and the issuing banks (i.e. those ultimately sending payments from consumers’ accounts) are in a strong position to decide how and when, and with whom, they do business.
How the deal benefits Visa is more difficult to see. This is certainly not the first time that Visa has made a relatively large investment in a fintech company – it took a stake in the hugely successful Klarna in 2017 - but, in the scheme of Visa’s existing customer base and market share, the purchase of Plaid seems unlikely to have a big impact on the business. One view is that Visa is positioning itself for the greater adoption of ‘open banking’ (the idea that consumers and SMEs allow financial institutions access to some, or all, of their banking data, which in turn provides them with more advantageous terms on certain products and services). As noted above, this would certainly boost Plaid’s power in the market, in particular when dealing with retail banks, and some suggest that this could lead to a more standardised approach to agreeing APIs, thereby making it easier for other participants also and facilitating the development of open banking more generally.
Another view is that the acquisition has little to do with facilitating open banking for all, but rather that Visa is attempting to control the development of open banking in a way that suits its strategic goal of becoming the ‘network of networks’. The argument goes that the purchase of Plaid simply provides Visa with a further avenue through which to channel its existing business - which is to earn revenue from payment transactions. Precisely how it might do this is not yet clear, but it is quite possible that Visa could introduce a revenue raising measure that is something similar to the interchange fees that are currently levied on card payments.
The European Commission’s investigation into Visa may or may not impact on its strategy for Plaid, but, in any event, how Visa develops it aggregator business will be watched closely in the payments sector. Banks, whilst still in a relatively strong position to dictate business terms, will be conscious that the game has changed somewhat given the scale that Visa can now apply to Plaid’s business operations. Others in the sector, fellow aggregators in particular, will hope that the direction of travel will eventually provide them easier access to banking data and, with it, further opportunities in the open banking market.
Sweden-based payment and shopping service Klarna has completed its latest equity funding round, raising $650 million and achieving a valuation of $10.65 billion – cementing it as the highest-valued private fintech company in Europe.
The funding round was led by Silver Lake Partners, Singapore’s sovereign wealth fund GIC, and funds managed by HMI Capital and BlackRock. Other current investors include Dragoneer, Bestseller, Sequoia Capital and Commonwealth Bank of Australia.
Klarna has announced its intention to use the funding to invest in its shopping service and expand its global presence, singling out the US as an opportunity for growth. The company already has more than 9 million customers in the US, and 90 million worldwide.
Founded in 2005, Klarna offers an app-based service allowing users to shop online and pay in interest-free instalments while Klarna pays the seller. It competes with other high-profile fintechs including Revolut and Checkout.
Klarna co-founder and CEO Sebastian Siemiatkowski said in the deal announcement that the company was at “a true inflection point in both retail and finance.”
“The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers who are now actively seeking services which offer convenience, flexibility and control in how they pay and an overall superior shopping experience,” he said.
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Silver Lake heads Egon Durban and Jonathan Durham hailed Klarna’s business model in a joint statement. “Klarna is one of the most disruptive and promising fintech companies in the world, redefining the eCommerce experience for millions of consumers and global retailers, just as eCommerce growth is accelerating worldwide and rapidly shifting to mobile,” they said.
Klarna’s last funding round was completed in August 2019, raising $460 million and earning the company a $5.5 billion valuation. The company has surged in strength during 2020, as Siemiatkowski claimed in August that the value of transactions processed through its platform increased by 44% through the first six months of the year.
Citigroup Inc. has asked a federal court to order Brigade Capital Management LP to return a sum of $176 million that the New York-based bank wired to its accounts in a clerical error.
On Wednesday, loan operations staff at Citigroup mistakenly transferred $900 million to creditors of struggling cosmetics company Revlon Inc., a figure 100 times the size of the interest payments the bank had intended to make.
Citigroup stated that it had intended to send just $1.5 million to Brigade to cover interest on its loan of $174.7 million to Revlon, but instead sent $176.2 million.
After discovering its mistake, the bank “promptly asked the recipients to return its money,” according to Citigroup’s filing to the Southern District of New York Court. Some returned the erroneous payments, while others – including Brigade – did not immediately return the money, “despite crystal-clear evidence that the payments were made in error.”
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Citigroup also noted in the suit that the money transferred was its own, not Revlon’s, and therefore should not be considered a repayment of the company’s outstanding loan.
Brigade did not immediately respond to a request for comment by the BBC, and Citigroup declined to comment further.
The special purpose acquisition company also listed shared upon completion of the transaction, the resulting company will continue to operate as Paya. It will be listed using its new symbol PAYA on NASDAQ. The combined company, Paya, now has an implied enterprise value of roughly $1.3 billion as a result of the transaction.
Paya CEO Jeff Hack tweeted that the company is excited about the new partnership and hopes it would accelerate their journey of becoming a public company. He also thanked the company’s existing majority equity holder, GTCR for their continued support and investment.
He added that Paya has an impressive track record of “creating differentiated value” for its software integration partners along with their end customers. Hack also expressed his vision for the future of Paya as a publicly traded company, saying that they will continue investing in product innovation, while also focusing on providing their software partners with excellent support. He added that they company will continue to work towards having access to the required capital for more strategic acquisitions.
The current management team of Paya, led by CEO Jeff Hack, will continue to be in charge of handling and executing growth strategy of the combined company. GTCR, a leading private equity firm, will continue to be the largest stockholder of the company.
GTCR is no new name in the fintech industry. In fact, it is a long-time investor in the industry known for its successful support of fast-growing finance and payments public companies such as Syniverse, VeriFone, and Transaction Network Services.
The current management team of Paya, led by CEO Jeff Hack, will continue to be in charge of handling and executing growth strategy of the combined company.
Commenting on the merger, Managing Director of GTCR, Collin Roche said that the agreement between Fin Tech III and Paya shows the effectiveness of their Leaders Strategy™ approach and its ability to transform various businesses that belong to industries that GTCR knows as well as the payments industry.
They also expressed their excitement to provide continued support to Paya in "this next chapter of growth," adding that the management team has made calculated investments in technology and talent to build a unique, effective, and scalable integrated payments platform in attractive end markets.
Meanwhile, Paya is no newcomer either. It already has more than 100,000 customers and processes a total of more than $30 billion. It can even deliver vertically-tailored payments solutions to its business customers through Paya Connect, an ACH platform and proprietary card. Paya partners with well-known software providers to deliver these solutions to their business customers, many of which are in markets like healthcare, education, non-profit and faith-based, B2B goods and services, and more.
One of Paya's major appeals is that it boasts a seasoned management team with years of industry experience. The team, led by CEO Jeff Hack, has a combined experience of more than 100 years in the payments industry and they have worked with major companies such as PayPal, JPMorgan Chase, Vantiv, and First Data.
Additonally, Paya also has an attractive financial profile. Its impressive KPIs have set industry standards, and includes an average ticket of more than $200. Besides, the company has a proven track record of high cash flow generation supported by a strong operating leverage and historical growth.
Looking at these impressive highlights, Paya shows a promising future in trading as a public traded company.
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Apart from the implied enterprise value of approximately $1.3 billion for the combined company, the transaction has several other implications. Fin Tech III’s cash in trust will find the cash component of the consideration, along with a private placement from a number of organizations.
The balance of the consideration will include shares of common stock in the combined company. Suppose stock price targets – as specified in the definitive merger agreement – are met. In that case, it is likely that current equity holders in Paya will receive an earnout of additional shares of common stock. By rolling over a large amount of equity into the combined company, the equity holders, along with the management team and GTCR, will continue to be the largest stock holders.
The merger is expected to be completed in the fourth quarter of this year. Approvals from FinTech III stockholder as well as regulatory bodies are still pending as of now.
This transaction is likely to have a significant impact in the fintech trading market. While trading, it is important for investors to use only trusted and reliable trading platforms so they have access to reliable knowledge and resources.
Sources:
https://www.finextra.com/pressarticle/83575/paya-acquired-by-fintech-iii
https://www.businesswire.com/news/home/20200803005351/en/Paya-FinTech-III-Announce-Merger-Agreement
At the beginning of the pandemic, touch-free payments gained international traction across the world in response to changing consumer behaviour at the checkout. Previously, consumers were happy to punch in a PIN, but they are now familiar with more convenient and safer touch-free methods, such as contactless payment cards – and they’re not likely to let them go.
Across Europe, high-street stores have rapidly shifted to contactless payments, often refusing to accept cash. Meanwhile in the USA, contactless payments have rocketed since the pandemic after a slow initial adoption of the service, given that US banks only adopted contactless cards in 2019. That’s compared to 2007 in the UK. According to Visa, overall contactless usage in the USA has grown 150% year-on-year as of May 2020.
Even mega-retailer, Walmart, has recently introduced contactless options for in-store shopping and delivery to protect its customers during the pandemic - showing there is a growing demand for a touch-free and convenient way to pay across the world. This has raised awareness of touch-free payments among consumers looking to reduce contact-based interactions and time spent at the checkout during the pandemic.
The rise of mobile payments
Mobile payments are also growing, again showing the desire for touch-free authentication among consumers. According to Forbes, the US mobile payment market – currently only sixth in the world – has increased 41% and is worth more than $98 billion.
To respond to the growth of touch-free payments among small vendors, PayPal has launched a new QR code-based payment app that allows market stall holders or businesses without a PoS machine to accept payment through a code. This means even the smallest of merchants, from small stores and farmers’ markets to craft sales, can now go cash-free and use touch-free payments for everything.
Meanwhile, China has long been using QR code-based apps, such as WeChat Pay from tech giant TenCent and AliPay from Alibaba. The apps are so widely used that street vendors display QR codes for payments and together the two FinTech giants control about 90% of China's digital payments market.
Card remains the number one preference
At the same time, payment cards are still consumers preferred way to pay. Of course, we only need to look to Apple and Google, who recently have launched physical payment cards despite running mobile payment apps for further proof that payment cards are far from dead.
According to Forbes, the US mobile payment market – currently only sixth in the world – has increased 41% and is worth more than $98 billion.
So why aren’t cards on their way out, given the growth of mobile payments?
We know that consumers still look to payment cards for security and a sense of familiarity while shopping. According to IDEX Biometrics’ research carried out in the UK, only 3% of consumers choose to use mobile payments, while nearly two-thirds (65%) state that carrying their debit card provides a sense of security. And when it comes to touch-free payments, only biometric payment cards can provide the most secure level of validation with an easy digital experience for shoppers.
Despite the popularity of WeChat as a payment app, China’s biggest card provider China UnionPay has recognised that its customers aren’t ready to give up on physical payment cards either. China UnionPay has recently certified the first biometric fingerprint card technology in the country as they look to the use of biometric technology in cards to provide an extra layer of security, with added convenience and hygiene during a payment transaction.
Secure and touch-free card payments for all
A fingerprint biometric card allows the user to authenticate their ID by touching their finger to the card’s sensor while holding it over the contactless card machine. Therefore, the shopper only has to hold their own card over the PoS system, making the entire transaction process free of public PIN pads or checkout counters. Not only does touch-free payment technology provide consumers with the convenience of contactless or mobile payments, but far greater security, as the card is personally tied to the owner. Furthermore, biometric fingerprint payment cards provide end-to-end encryption – securing the user’s card and data.
The process of paying with touch-free biometric payment cards is no different to how consumers currently use contactless payment cards. What’s more, biometrics are widely used in society and already firmly incorporated into our everyday lives. Thanks to unlocking our phones and authenticating payment apps, we are increasingly using our fingerprint to verify our identity. Now that consumers are familiar with the technology, it is only a matter of time until biometric identification in payment cards will become essential to help consumers navigate the shopping and transaction process safely, speedily and securely.
As our economy gradually reopens and consumers find their ‘new normal’, financial services have a responsibility to protect consumers during the transaction process to encourage greater security and hygiene at any point of sales. In stores, on transport systems – even eventually in stadiums – a fingerprint biometric payment card will provide touch-free payment authentication for all.
Though the threat of collapse has been looming over Virgin Atlantic for months, the airline is now looking to finalise a £1.2 billion rescue package from a trio of credit card payment processing companies, according to reports.
Due to the COVID-19 pandemic and its debilitating impact on air travel, Virgin Atlantic has been seeking more than £500 million in debt and equity funding for several months.
The company has already secured the support of both American Express and the Lloyds Bank-owned Cardnet and continues to negotiate with First Data. In return for its backing, First Data has reportedly demanded that it be allowed to hold onto all future bookings revenue as “protection” should Virgin Atlantic collapse.
As part of the deal, Virgin CEO Sir Richard Branson will contribute £200 million in funds from Virgin Group, which was raised through the sale of a £396 million stake in space tourism company Virgin Galactic during May. US hedge fund Davidson Kempner Capital Management will inject a further £200 million against Virgin’s assets, and a further £400 million will be raised through the deferral of fees.
Speaking on the sought-after deal earlier this month, a Virgin spokesperson referred to the arrangement as a “comprehensive, solvent recapitalisation of the airline”.
Virgin Atlantic employs Should the deal be agreed upon, thousands of jobs in the UK and overseas may be saved.
According to Sky, the final outline of the agreement will be announced by Virgin next week.
Chris Brooks, CFO at Modulr, offers Finance Monthly their perspective on how businesses can turn payments to their advantage in fraught times.
As the Chief Financial Officer at Modulr and someone with over 15 years’ experience in the finance industry, I’ve witnessed a great deal of change in the way businesses manage their payments. But to date, no period has been as transformative as the one we’re entering right now.
For decades, small businesses have been let down by their payment processes. That’s because the majority rely on outdated, manual and inefficient payment services from traditional banks with legacy IT systems. The problem is compounded by the inefficiency of banks when disbursing loans, which are often critical to getting small businesses off the ground. In fact, some small business owners claim to have been left on the verge of collapse after the amount of time taken to process their bounce-back loans.
Sometimes it takes a crisis to shake businesses out of apathy. COVID-19 has shone a light on payment inefficiencies and highlighted the urgency of digitalisation.
Fortunately, fintechs are flourishing across the UK and providing new technologies that could transform the payment space. Here are three areas where payments innovation could help businesses become more resilient, future-proof and competitive.
Sometimes it takes a crisis to shake businesses out of apathy.
When COVID-19 led to sudden and widespread remote working, it starkly exposed the hidden inefficiencies in existing processes. Companies that were stuck in the old, manual way of managing payments suffered major disruption. While those that were ahead of the digitalisation curve managed to maintain business continuity.
In the accountancy space, many practices had already embraced cloud computing and payments automation. They were able to make the transition to remote working seamlessly – accessing client workflows from home and managing payments through centralised portals like Sage Salary and Supplier Payments, just as they would in the office.
But we’ve also heard from accountants who, prior to the crisis, had still been in the habit of driving to their clients’ offices and picking up folders of paperwork. Many more were doing things digitally – thanks in part to Making Tax Digital - but not in a completely centralised way, which required the ad-hoc sharing of files across insecure methods like email or third-party file transfer systems.
These workarounds are highly problematic in a time of crisis. Fraudsters will actively seek to exploit new vulnerabilities. According to UK Finance, Authorised Push Payment (APP) fraud cost UK businesses £138.7m in 2019. Only £33.8m was reimbursed. And since COVID-19, we’ve seen the emergence of entirely new scams and techniques.
Fortunately, new payment technologies such as Confirmation of Payee (CoP) are being introduced to help businesses safeguard funds. With CoP, payment service providers (PSPs) will be able to check if the name of the individual or organisation entered by the payer matches the identifying information of the account paid. This can prevent consumers and businesses from being tricked into pushing funds to a fraudster’s account.
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As businesses seek to recover from the impact of COVID-19 and navigate this tough economic environment, finding ways to maximise efficiency and reduce operational costs will be critical. This is especially true for businesses that have furloughed employees and are forced to work with leaner teams.
Manual payment processes are a heavy burden for finance teams in today’s fast-paced, challenging environment. They waste time, incur errors and result in significant administrative costs. That’s why fintechs are developing sophisticated solutions that allow businesses to automate all aspects of the payments workflow.
A good example is payment splitting. This is when a business receives an incoming payment, divides it based on a calculated percentage, and sends two payments out to end beneficiaries. When done manually, it’s a time-consuming process. But automation offers a powerful solution, allowing payments to be split automatically based on customisable rules.
Imagine a property management business that’s collecting rent from tenants. Rent collections are typically complex and unwieldy, as payments are sent to the estate agent’s bank account and then manually reconciled and split before sending funds to the landlord. But with automated payment splitting, rules are set to automate the amount collected and sent on – drastically cutting down admin time and reducing operational costs.
That’s just one example of the power of automation. It can have a significant impact on all aspects of payments – receivables, payables, collections and disbursement. Not only does this reduce operational costs, it can help businesses to maintain payments continuity when employees are forced to work away from the office.
Cashflow is the lifeblood of any business, and right now it’s even more vital for survival.
Faster Payments is a relatively new scheme compared to traditional methods like Bacs, but it’s already having an immense impact on UK commerce and business uptake is likely to accelerate. Initially designed to speed up the payment process for retailers, Faster Payments are meant to clear in less than 2 hours, though this is often far lower; at Modulr we’ve reduced it to seconds. This is a major improvement on Bacs payments, which can take up to three days to clear, meaning funds are held in limbo for that time period.
Cashflow is the lifeblood of any business, and right now it’s even more vital for survival.
The impact of using Faster Payments can be far-reaching. By allowing just-in-time payments and the ability for a business to hold onto cash right down to the very second, Faster Payments enables greater control, visibility and forecasting of cashflow throughout the year. Finance teams can more accurately predict what cash they will have and when, and plan to pay invoices at strategic times. This will be increasingly critical as businesses strive to recover from the impact of COVID-19.
To summarise; technology is going to continue disrupting all areas of business. And the same goes for the payments industry. New solutions being developed by fintechs can help companies to improve cashflow management, significantly reduce operational costs and protect their money.
With such a challenging and uncertain economic environment in the months ahead, there’s never been a bigger incentive for change. Companies are faced with a critical choice – to keep relying on slow, outdated payment methods, or overhaul everything and find better ways of moving and accepting money. By choosing the latter, businesses can boost their resilience and weather future storms. And those that move first might that find payments become their competitive advantage.
Last week, news broke that EY auditors refused to sign off on Wirecard’s accounts for 2019, citing a missing sum of €1.9 billion that documents purported to be held in two bank accounts in the Philippines. CEO Markus Braun claimed that the company was the victim of “the victim in a substantial case of fraud,” and COO Jan Marsalek was suspended, later to be terminated. Braun then resigned from the company on Friday.
Braun turned himself over to Munich police on Monday evening after a warrant for his arrest was issued. He is suspected of recording false transactions to artificially inflate Wirecard’s sales, increasing its value in the eyes of customers and investors. Philippine authorities are also investigating the whereabouts of Marsalek as part of a broader probe into the company.
On Thursday, the company said in a statement that it would apply to the Munich district court to open insolvency proceedings as a result of its “impending insolvency and over-indebtedness.”
The company’s shares were suspended from the Frankfurt Stock Exchange before the announcement was released.
Wirecard was long regarded as a star in the German fintech scene – a DAX 30 company which was once valued at €24 billion. That value has plummeted through the floor as the week of revelations continued, though it saw a brief 27% uptick on Tuesday following the news of Braun’s arrest.
Trading on Thursday saw Wirecard’s value drop by a further 76% once news of its insolvency broke.
Not only will it make you more efficient once life returns to normal, but it will also help to save you money which can be used to reinvest in staff and other areas of your business. These are some of the reasons why COVID-19 is the perfect opportunity to reorganise your finances and the ways in which you can do so.
When dealing with finances, specialists can offer targeted advice that offers greater results. But particularly during these uncertain times, gaining professional advice and guidance is key, so now is a great time to work with accountants or financial specialists who really understand the nuances of your industry.
“Once you have your plan in place, you need to make sure that it is financially viable, to make sure that you are realising a profit,” says OS Accounting, a chartered accountancy firm that specialises in working with SMEs. “Any banking or financing house will expect to see realistic and well-considered financial budgets and forecasts and translating an idea into facts and figures needs experience."
No sale is complete without your customers paying you for your service or product. But with an increased need for contactless payments in light of the pandemic, it’s vital that businesses adopt and embrace cash-free payment options.
From PayPal to Amazon Pay and Apple Pay, there are various options to choose from that will make it easier for your customers to pay you to keep your business taking an income.
With an increased need for contactless payments in light of the pandemic, it’s vital that businesses adopt and embrace cash-free payment options.
It’s much easier to keep track of all of your financial documents if the business is digitised. While lockdown forces us all to adopt more downtime, there’s time to make the switch to a more digital way of working.
Not only does it make accessing these documents easier when working remotely, but it also provides a safer form of storage as leaving hard copies in filing cabinets makes it easy for data to be stolen. There are many online tools and software options that will help you digitise your business, particularly where finances are concerned. However, make sure that all of your documents are backed up with a cloud-based service so that you can be sure they are secure.
Now is the time to make use of more time and do the things you’ve intended to do for months but haven’t had the time. Use the lockdown to take stock of how your business is operating and make the necessary changes – this might include separating personal and business finances more efficiently by opening a separate bank account or tracking and auditing your expenses.
Whatever financial tasks that have been sitting on your to-do list for a while can now be ticked off to make the best use of your downtime.
COVID-19 offers a chance for a fresh start in numerous ways, but particularly where processes and systems are concerned, so get into new habits that will help streamline your business processes for the future. One way to do this is to hold regular weekly finance meetings so you can regularly keep track of income, outgoings and expenses.
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Money is tight for some SMEs and may be fluctuating more than usual during the pandemic, so it’s a great time to gain an understanding of where your money is going. By having this knowledge, you’ll be able to avoid the liabilities that can bring many businesses down in order to keep it running productively and profitably.
Businesses across a host of industries have found themselves in unchartered territory since the COVID-19 pandemic began, but it has hit SMEs harder in many cases. By making use of this time to reorganise the financial aspects of your business, you can hit the ground running once life returns to normal and ensure that your business continues to turn a profit throughout.
We want brand experiences to be fast, personalised and seamless. Digitally native brands like Uber and Netflix have raised the bar for simplicity and convenience in every transaction, and the rise of challenger banks like Monzo and N26 is a clear example of how innovation in financial services is following these trends. Chris Ford, senior director at Blackhawk Network, explains to Finance Monthly how the COVID-19 pandemic has accelerated these trends.
Research from social media management platform, Hootsuite, found that in the first quarter of this year, 42% of online shopping was paid for with digital or mobile wallets. But, whilst payment behaviours were already changing, this has likely been exacerbated with consumers forced to dramatically change their daily lives by staying at home and adhering to lockdown regulations. Historically, chaos has fueled innovation and from what we’ve seen it may very well be true in this case. We are about to go through a new revolution in how we pay. Those that adapt quickly will win, whilst those that don’t will struggle to survive.
Right from the early weeks of the COVID-19 outbreak, businesses have started to become cashless to avoid unnecessary physical contact. Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result. As the lockdown measures were put in place, the need for alternative ways to support people throughout the crisis has also increased the adoption of alternative payment methods such as e-code vouchers and gift cards. Even the UK government reacted by setting up the supply of supermarket vouchers for families that rely on free school meals.
Contactless payments have been encouraged by many retailers and we’ve seen the limit increase to £45 as a result.
The grocery industry, which has experienced the COVID-19 impact like few other sectors, has had to adapt quickly to changing shopping habits. From forming physical barriers for staff, to working with every aspect of their supply chain to maintain stock levels, innovation has been essential. This innovation has also extended to payments with a new category being born: the volunteer gift card. With vulnerable people not able to leave their homes to shop, these gift cards have let them send money to friends, families or neighbours who are taking on the grocery run.
The financial services industry has also developed new services to support customers who are self-isolating. For example, NatWest has created companion cards that allow others to pay for your shopping without having to give over your main account card. Additionally, those that can’t physically get to the shops to buy presents have turned to gift cards as a thoughtful way to keep in touch.
COVID-19 has pressured business leaders to accelerate the innovation that was already on the way. 50% of the UK population is already cashless according to Access to Cash Review published in March, and COVID-19 is seen as a way to make more of us move towards being cash-free. With lockdown restrictions not going away anytime soon, we will have a longer period of time to adopt these new behaviours and they are likely to hang around long enough to make them stick.
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Before COVID-19, the demand for gift cards was already at a record high, with the total value of the global gift card market expected to reach $506 billion by 2025. With more organisations adapting to the new normal, the development and uptake of alternative payment methods will continue to increase and e-codes help to lead the revolution.
Apparently, it takes 66 days to form a new habit. Lockdown measures have already exceeded this timeframe in the UK, meaning that new payment habits are likely to be here to stay. Brands need to make sure they respond quickly to these new behaviours to keep meeting and exceeding customer’s expectations.
Our new norm as individuals was always going to change when it came to payments. COVID-19 has accelerated that shift in behaviour and it’s a delight to see so many companies rising to the challenge.
After weeks of being put under stringent lockdown measures due to the COVID-19 pandemic, people will be bracing for difficult days (or even weeks) ahead even as these measures are gradually lifted.
Even then, people need to make ends meet in one way or another. And while it is difficult to know how and when this crisis will actually end, it is important now more than ever to make good financial decisions.
Let's take a look at a few important tips for how you can keep yourself from going under in these difficult times:
The coronavirus, which causes the deadly disease known as COVID-19, has permeated local and international news since it was first detected in China. Now, it has become a crisis that governments are desperately trying to contain.
If you have been following the news lately, chances are you have been on a spending spree for essentials. With quarantine measures in place, many are now finding it hard to stock up on the essentials like toilet paper.
It is easy to be confused with all the information out there regarding the pandemic. If you let your guard down and make unnecessary purchases as a result, you can do yourself a lot of harm.
Whatever happens, it's best to remain calm and follow government advisories. At this point, the best you can do is to prevent the spread of the virus and get updates from trusted news sources. This will help you gain clarity as you figure out what to do with your current resources.
Whatever happens, it's best to remain calm and follow government advisories.
Having a credit card is convenient, but when you are in the middle of a serious health crisis, you have to do what you can to get by.
Luckily, consumers in the US can breathe a sigh of relief as major credit card providers have agreed to waive payments for March and possibly beyond. All you have to do is to contact the number on the back of your card and ask your bank about how you can get relief.
It’s important to note that providers such as American Express and Capital One have allowed cardholders to skip payments without interest. Other banks such as U.S. Bank and Wells Fargo have also announced that they are offering to waive fees and provide other forms of hardship assistance. Again, you will need to contact your bank and see what they are offering.
This is a reasonable time to dip into your savings account.
Whether it's a time deposit account, notice accounts or a fixed rate savings account, it would be practical to use this money as a buffer to get you through the entire quarantine period. At any rate, ensure that you can withdraw the amount you need without any penalties.
So long as this crisis lasts, it is important to keep your spending to a minimum. This may mean scaling down on non-essential expenses such as streaming subscriptions and luxuries bought online. These are sacrifices you may need to make to keep yourself financially afloat in the next few weeks or until the crisis passes.
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Another way you can slow down the depletion of your hard cash reserves is to make full use of gift cards, loyalty points, and discount vouchers. These will really come in handy if you are going out shopping for groceries.
And considering that this is a national health emergency, you should consider making use of cards that help you pay less for prescription medicine. Check out prescription discount card details for where and how to find the best deals.
One good thing right now is that mortgage providers are offering different types of mortgage relief interventions for homeowners who can defer making payments through a 90-day period.
If you are in a difficult situation, it is best to contact your lender and see if you can strike up a forbearance agreement.
If you're renting an apartment, make sure to talk with your landlord to discuss new payment terms and see if you can avoid paying late penalties. Local governments are prohibiting evictions from taking place. This could give significant relief if you have been displaced as a result of the pandemic.
In such extraordinary times, you need to keep your finances from dwindling. This might take simple sacrifices or leveraging government aid efforts. In either case, your financial survival will depend at least partly on the measures you take.
The impact of the COVID-19 pandemic on businesses worldwide has been nothing but staggering, and not in a good way. No industry in the global economy is left untouched and a recession is imminent now. This means that money transfer companies are going to suffer through some major downtime. The question is whether they will be able to get through it and how they will have to change.
On the other hand, the pandemic has caused a major increase in the demand for fintech solutions. This means that money transfer companies with a wide range of additional services might get an opportunity to increase their customer base.
To understand the implications of the COVID-19 pandemic and its impact in the money transfer industry one needs to understand how that industry operates. Online money transfer platforms and brokers have been growing rapidly in number and popularity over the last few years. The reason for this is the increased rate of globalisation.
However, the growth of such businesses is also one of the reasons that make this rate of globalisation possible. These services made international money transfers affordable. This means that cross-border financial transactions became available for small businesses and investors.
Not so long ago, bank wire transfers and a few money transfer corporations (Western Union and MoneyGram) were the only options for transferring money abroad. The problem with them is that both charged high rates. They also use a high markup on foreign currency exchange rates.
Online money transfer platforms and brokers have been growing rapidly in number and popularity over the last few years.
Overall, a single transfer to or from abroad could cost up to, and sometimes even over, 10% of the amount. Small businesses with their tiny revenue couldn’t afford such transactions. Therefore, they were denied the opportunities offered by using cheaper services and materials delivered from abroad.
The situation is like this because those fees and markups are what banks use to make money. However, online money transfer companies are completely different. They do not transfer money physically across borders. Instead, the customer deposits the amount they need to the company’s account in their country. Then, the company transfers an equal amount to the recipient from its account in their country.
This approach allows businesses to minimise transfer costs. And money transfer companies that operate in such a manner make their profit from the volume of transfers they process. Therefore, it’s more beneficial for them to keep their fees as low as possible to attract more customers.
Unfortunately, due to the crisis caused by the pandemic, money transfer companies have fallen on some bad times. Even #1 companies like TransferWise struggle because of the reduced flow of transfers. These companies largely depend on small businesses, which are failing at an alarming rate.
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It’s not a surprise because even big international corporations are struggling today. For example, the reduction in international travel, has already caused the near-collapse of Virgin Atlantic. With huge companies like this failing to survive, the majority of small businesses have no chance whatsoever.
The other major group of customers for money transfer companies is small property investors. Cheap transfers made it possible even for people without huge fortunes to purchase properties abroad. This rapidly developed into a major industry as easy international transportation made the tourism industry boom. However, with travel restrictions and lockdowns in many countries, the hospitality sector has been hit greatly. The reduction in buyer capability will also affect the real estate market all over the world.
Small businesses have been hit the hardest by this situation. Their main problem is the lack of free funds to tide them over through the lockdown. There are some lending programs from governments that should help these types of enterprises. However, those are hardly sufficient. They are also not available worldwide.
Because of the enforced hiatus, small businesses have reduced the volume of their international transfers. The situation should change for the better when the world gears back after lockdowns are lifted. However, this would be a slow process.
In the interim, money transfer companies will suffer the same fate as small businesses. Those among them that do not have the funds to get through the downturn will perish.
The real estate market worldwide is pretty much frozen at the moment. It’s starting to reanimate in some places, but this process is even slower than the small business restoration.
The good news is that the housing market in many countries has been on the rise in recent years. On the other hand, the pandemic has severely decreased people’s ability to actually buy properties. This means that the current slowdown of the market will be followed by a bigger dip. The real estate industry will recover in time, but this won’t happen fast.
The good news is that the housing market in many countries has been on the rise in recent years.
Meanwhile, investors are sure to reduce their transfers. Again, money transfer companies will lose a major contributor to their cash flow, but offering assistance and hedging tools to the existing investors today can help tide them over.
The situation for money transfer companies and brokers is grim today. However, there is no doubt that it will improve. Moreover, this industry should recover faster than some others. That’s because this type of service has been in great demand even before the pandemic. But after this world-shaking event, it will be even more needed.
As mentioned before, even big corporations now struggle to stay afloat. Therefore, they will be looking for every way to cut costs and boost their efficiency. International deals and cheap money transfers are both essential for succeeding in this.
Admittedly, governments are doing what they can to support businesses and therefore reduce the negative impact of the pandemic. However, their success is limited, and it’s only a few countries that can make any big difference for small businesses.
Therefore, money transfer companies will have to wait for a while until their customer traffic is restored. The ones that can make it will definitely grow rapidly. Also, businesses that expand to online banking on top of offering international transfers have a better chance. Those are already in high demand as the world is going digital even faster than before.
All in all, for all that it seems bad now, the situation for the money transfer industry is very promising.
