Other parts of this series:
The COVID-19 pandemic has presented the global economy with challenges and changes not seen in generations. Payments providers in Europe need to navigate the operational and financial hurdles the virus presents while also rapidly addressing the needs of the workforce, customers and partners.
The situation is exceptional—and that makes reliable data and forecasts particularly valuable.
Here’s the latest data on the impact of the pandemic on payments in Europe.
Cash withdrawals are down sharply
The pandemic has put a serious dent into cash usage. That much is not surprising—but the extent of the impact is striking:
- In the UK, data from Link shows a decline in the range of 60 to 65 percent compared with last year. ATM providers in Germany report an almost identical drop since mid-March.
- Spain’s Caixabank and Bankia are both reporting a drop in cash withdrawals of 40 percent since the beginning of lockdown. A study from neobank N26 found cash withdrawals fell by 68 percent in March.
- Cash withdrawals dropped nearly 60 percent in France in early April.
- Italian ATMs have seen a decline in withdrawals of well over 54 percent.
Taken together, this data suggests that cash usage has fallen roughly by half across Europe.
Consumer spending has seen similar dramatic changes.
Winners and losers
A recent survey we conducted found that 75 percent of consumers in the Netherlands, the UK, France, Germany and Spain have reduced their weekly purchases since the COVID-19 outbreak began.
Most of this reduction (71 percent) has affected offline or in-store purchases.
On a sector basis, the single biggest loser has been restaurants. Roughly 79 percent of consumers say they are spending less on in-store restaurant purchases since the pandemic began. This sector is followed closely by vacations (75 percent), transport (73 percent) and entertainment (65 percent). Retail and home sectors have also both seen contractions, though on a smaller scale (30 percent and 25 percent, respectively).
However, the survey’s findings were not uniformly negative. Roughly 13 percent of consumers reported an increase in weekly purchases since the start of the pandemic. Those who increased spending did so overwhelmingly online.
Sectors in which consumers reported the biggest increases in online spending are:
- Groceries, at 17 percent
- Takeout at 8 percent
- Electronics at 8 percent
- Home furnishing at 5 percent
- Subscriptions at 4 percent
As consumers shift their spending habits due to the pandemic, what they expect from payments players and other financial institutions is also changing.
Contactless payments are no longer nice-to-have
The biggest single change in this area is contactless payments, with 61 percent of consumers saying they are now expected because of COVID-19. This is the only new expectation in the data set expressed by a majority of survey respondents.
Other new expectations are diffuse and diverse. Flexible payment terms are the second-most popular expectation, with 34 percent of consumers endorsing them. Fee waivers, extension of credit lines, loyalty discounts and personalized support were all endorsed by roughly 20 percent of consumers.
The survey that revealed the insights above was conducted in the first week of April 2020 with respondents in the Netherlands, the UK, France, Germany and Spain. Our research team has also developed a forecasting model on the short-term impact of the COVID-19 crisis on payments.
In my next post, we’ll look at what this model can tell us about the future of the industry.