On Dec. 1, 2019, there was no shortage of predictions about which stories would drive payments, commerce and the global financial ecosystem. Trade disputes, the connected economy, new banks, cryptocurrency, mobile wallets, instant payments, trade disputes, mergers and acquisitions, biometrics, synthetic identity fraud — we could literally go on and on. As is customary in the last few weeks of a year — particularly one that caps off a busy decade — everyone takes to the web to promote their favorite prediction for what will come out of the gate in the new year to start shaping the epoch.
But as it turns out, 2019-2020 will go down in the record books as one of those years where everyone got it wrong — because a black swan showed up.
What no one predicted, or possibly could have, was that a novel coronavirus called COVID-19 would appear out of the ether, break containment in China and, in a little under 10 weeks, infect nearly 100,000 people worldwide, shut down the global supply chains and send the stock market through the floor in its worst week since the Great Recession.
It’s a situation, as Boku CEO Jon Prideaux told Karen Webster, where fear of the unknown is starting to outweigh every other concern people have — and is impacting behaviors and choices in ways rational and irrational.
“As we saw last week, the sea of red happens in the market, and people just sort of panic and start buying cash and gold, because there is suddenly this great lack of consumer confidence,” Prideaux noted.
But that doesn’t mean all preparatory behavior is irrational, he added. It makes sense that businesses are pulling back on travel, airlines are limiting trips in and out of heavily infected areas and people are on the whole avoiding crowds, big events and other places where an airborne virus can easily spread. Those preparations have collateral damage associated with them, but that doesn’t make them unnecessary or an overreaction. In fact, Boku has taken on some of those precautions when it comes to limiting employee travel and instituting homework when necessary.
But beyond COVID-19’s costs and limitations, Prideaux said, perhaps just as interesting are the adaptations and innovations that are now being pushed to the forefront to counterbalance the disruption. The world isn’t going to stop, nor are housebound consumers going to sit and stare at their walls for the next several weeks or months. The extensive work over the last decade to digitize the physical world appears to be on the verge of tapping an expanded field of use cases, Prideaux noted.
This means the ability to secure all of those digital interactions — and to power the transactions embedded in them — is about to become a uniquely useful competency.
Costs And Benefits
For those in the manufacturing and travel verticals, the hit has come on fast and hard — and thus far, it doesn’t look like the issue will be a passing or transient one. The disruption, Prideaux noted, is real and profound. Consumers really don’t want to travel unless absolutely necessary. Given how much spending volume is typically driven by travel, that means there will be downstream effects for entities like card networks.
It’s a similar story on the manufacturing side, given the number of firms that rely on China for at least some part of their production, said Prideaux. And that encompasses more firms than people might think: Even if an entire product isn’t manufactured in China, odds are quite good that some part of it is, which means the reverberations of a virtual production shutdown will be felt far and wide.
“Those firms are going to be disproportionately affected,” he said. “Given the sheer number of things that are manufactured or assembled in China, this is going to be a big problem in the global supply chain.”
But there is a flip side, which is the increasing number of consumers facing mandatory or voluntary quarantines who are now mostly confined to their homes. They aren’t traveling, going out to eat, going to the movies or even going to work in their offices. They aren’t going shopping. And while an incurable, rapidly spreading virus is certainly enough to influence human decision-making, Prideaux noted, it won’t change human nature.
Consumers still want to shop, they still want to be entertained, they still want to have connections with other people. Moreover, merchants still want to sell things to consumers — the global economy isn’t really in a position to pause because of a virus, which means activity is going to move.
And given the fact that virtually all of those homebound consumers have mobile devices in their hands, we have a pretty good idea of where that activity is headed.
Capturing and Expanding on the Opportunity
Necessity is the mother of invention, they say, and the last few weeks have illustrated that old aphorism. Armani was wary of hosting an event during Milan’s fashion week, so it held a runway show for an empty room and streamed it live. BMW couldn’t debut its newest model at a canceled Geneva Car Show, so they streamed it instead. Facebook has moved its F8 Develop conference online, and some sports franchises have taken to broadcasting and streaming games played in empty stadiums.
And, Prideaux noted, though it is still early days, relatively speaking, and they are still filtering the signal from the noise with their clients worldwide, they are seeing consumers subscribing to Netflix more, listening to more music and playing more games. The pent-up spend is starting to move to digital supply chains that won’t have the same difficulty “moving their goods from point A to point B” that their physical counterparts face.
While a lot of the economy is slowing down in response to COVID-19, Boku finds itself in a place where demand for mobile authentication and a fast, accurate and largely invisible system is likely to pick up as more activity shifts online.
What will be interesting to watch going forward, said Prideaux, is how the near-term adaptations and advances made to adapt to the virus survive and possibly even thrive in the long term, after the immediate crisis has passed. This change was happening before COVID-19 became a front-page concern – and it will be interesting to see how the injection of urgency now will play out later.
“In the near term, we are going to see some subtle upticks and some interesting plays,” he predicted. “But the thing to watch is whether – when this episode hopefully passes — there will be an end-to-end effect of stimulating adoption in some areas. I think there probably will be — I think that was the direction it was going, and ultimately I think it’s going there faster.”