Coronavirus

The Week In Payments: What The New Normal Will Look Like When It Comes

It is impossible at this point to write the week in payments (commerce, financial services and technology) without writing about COVID-19. As the United States ends its third week on lockdown and the whole world races to respond to the ongoing epidemic, there is almost no news item of any kind untouched by the event.

There was no shortage of headlines from the front this week – from another record-breaking wave of unemployment filings to relief funds for SMBs  to the full-court press by every player in the market to aid in the recovery efforts. This edition of the week in payments took a slightly different approach in Karen Webster’s conversation with PingPong Co-founder and Chief Business Officer Ning Wang.

Based in China, where COVID-19 got its start in the waning days of 2019, Wang has lived through something like what Americans are experiencing now – spiking infections and deaths, increasingly tight social distancing requirements and an economy that went from bustling to frozen nearly overnight. As China is now on the other side of the apex, Wang and Webster explored what the new normal might start to look like when it comes to the U.S. – for consumers, businesses and the economy in general.

The New Consumer Normal

In some ways, Wang told Webster, day-to-day life in China is no longer on hold. The workforce has gone back to their jobs, people are out and about in the streets (somewhat more) and restaurants are starting to open.

But, he noted, this is far from a switch that was flipped overnight, and the road back is a slow one. Restaurants are now operating under new capacity rules that limit how many people can be seated at once and how close together they can be. And re-openings are far from universal – in some places, restrictions are still keeping eateries closed, while the mix of lowered capacity and reduced demand has kept other places from opening. According to estimates, Wang noted, between 30 percent and 50 percent of restaurants that were open pre-COVID-19 will not reopen after it – an echo of PYMNTS’ most recent data reflecting that 58.4 percent of SMBs see at least some risk of closing up shop before the pandemic is over.

And consumers are different too, Wang noted, in that they’ve learned to cook at home and are building it into their daily routine. That’s possibly a change for the better, as people are realizing they are enjoying the extra time it is providing with their families –meaning the pressure to return to eating out is lower.

Which isn’t to say eating out in China is dead, or that it will be. People are social animals and they want to get back out there, something that is evidenced all over the country today. But the consumers who are getting back out there aren’t quite the same ones who went in three months ago, said Wang – they are more cautious and circumspect about being in crowds.

“I think in the short term and mid term, the situation is going to stick, and social distancing is going to be the new norm,” he predicted. “I think that’s going to be a worldwide phenomenon, which is going to provide a tailwind for the businesses that emerge and benefit from this trend.”

As for which businesses those will be…

The New Normal for Firms 

The story of winners and losers in the COVID-19 epidemic is still being written in real time, and it is too early to make much in the way of strong pronouncements, though there are trends to be observed. The first, Wang noted, is how the pandemic changed what constituted a necessary service offering nearly overnight. Delivery capability, for example, was a “nice to have” that Uber was building alongside its core business up until three weeks ago, when ridesharing suddenly became a service no one needed – and delivery became the service everyone needed.

As a result, Uber was able to pivot its efforts and expand them further into grocery delivery, while Lyft, which didn’t diversify its focus, had to refer its workers to Amazon for the duration.

And platforms like Uber and Amazon – which can flip to offering necessary services quickly, efficiently and affordably, Wang noted – are positioned to ride the unique set of tailwinds. Perhaps somewhat less expected is how formerly slumbering department stores have managed to (practically overnight) upgrade the efficiency of their operations around getting goods shipped to consumers, because they are able to use their stores as supply centers.

Therein lies the power of a physical store – proximity to one’s consumers – and it is something department stores can use as a lifeline, at least in the short term. The question going forward, said Wang, is what they can do with it in the long term.

“You can see that short-term lift now. The next question is whether they can make that endure – whether it’s in their DNA to expand and capitalize on that,” said Wang. “Whether these stores have the ability to mobilize to the shift … that is a big question mark for me.”

Because the shift is here, and it isn’t going away. But, Wang noted, that might not be such a bad thing.

The New Digital Normal

If one is asking when the world will go back to the way it was before 2020 made COVID-19 a common part of everyone’s vocabulary, the answer is probably never. The world will always be a different place after this experience.

But for all the hardship it has caused, and all the pain in the short term, the long-term change represents an exciting possibility. New business models will spring up, new customer journeys will be invented and a whole host of digital innovations will be hatched all over the world.

As far as digital has evolved in the last decade, said Wang, the extent to which the whole planet has shifted to work from home for a few weeks without catastrophic failure is pretty amazing. The business systems that survive today – and are thriving today –because of digital connections provide an opportunity for all firms to rethink how digital is applied to every aspect of day-to-day life.

And perhaps more importantly, added Wang, in a world that has been forced to socially quarantine and keep its distance, something really amazing has happened: Everyone, all at once, learned to come together while being apart.

“You see know how consumers are connected to businesses, how governments have reached out to citizens – I think it’s a time when everybody’s coming closer together than ever,” said Wang. “I think what’s happening is historical and also sobering, but overall I’m very optimistic, because people are more aware of where they are now and what they need to do next.”

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LIVE PYMNTS ROUNDTABLE: MODERNIZING & SCALING FOR THE NEW NORMAL

The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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