Coronavirus has seen a change in both consumer spending habits and methods of payment.
Payment Methods
With an increased focus on hygiene and sanitation, people are more reluctant to touch cash. Cash was already going out of fashion, with many establishments shifting to card payments only. With the advent of contactless payment, and the increased minimum spend, there is a definite graduation towards digital payments only. This trend can also be seen in banking. Gone are the days of a friendly local bank teller. The newest preference is digital-only banks. Banks such as N26 are thriving in the coronavirus economy.
Payment Habits: Buy Now, Pay Later
‘Buy now, pay later’ is a way of facilitating payments so that customers can pay in short-term installments. Companies offering this service are noticing a growing preference in their consumers. Fintech startups specialising in buy now, pay later are gaining traction. They are especially attractive for young people with no credit history or those with a bad credit history. They use alternative variables to measure creditworthiness. Instant credit is becoming very appealing and companies are starting to capitalise on this. This matches a “millennial” mentality; less pressure and lower commitment. This is a trend reflected across multiple industries.
How Much Money Do People Have?
It is worth asking the question: do people have more or less money than before? Whilst fixed payments such as rent remain the same and income is generally lower, it is easy to assume that people have less money. A large proportion of the population is on furlough meaning their monthly income is lower. However, in spite of this, reports show that personal disposable income may actually be higher. For businesses that are in a forced period of inactivity (for example, restaurants and hotels), their income is obviously lower. However, this means that their business to business spending is also lower.
At a personal level, individuals are rendered stuck in their homes. This means that although spending can continue through online platforms, spending on bars, restaurants, entertainment, transport and travelling has ceased to a halt.There has also been a staggering in personal savings – the difference between personal consumption and disposable personal income. One American study reported an adjusted annual personal savings rate of $1.3 trillion in February to $2.2 trillion in March. People are using this time to save rather than spend and may indeed end up with more money than before despite the wider economic situation.
