Since February 2020, digital payments have soared in many countries such as Italy. The e-commerce transactions in this European nation have increased by over eighty percent. The surge in demand of online payment methods is due to the worldwide pandemic, making housebound shoppers go online to stock up on groceries and medication. The other online purchases that those who stay at home during the crisis include for entertainment such as movie channel subscriptions. Many also download paid eBooks, audiobooks, and podcasts.
Since the pandemic accelerated earlier in the year, there were more regions such as California, New York, and France, that imposed similar restrictions to make people stay in their shelter, and these places also experienced a soaring in digital payments. There was also an increase in online payment transactions in these areas, and other places such as Korea and Japan.
The payment providers do not fail to facilitate the transactions. Some have fallen back to their contingency plans to handle the seasonal surge of online shopping such as during Black Friday sales. According to industry analysts, these payment providers tap their added on-demand capacity that exists in the cloud servers.
There was a sharp increase in online payments where merchants had difficulty dealing with such related challenges like shipping as the sheer volume of sales was overwhelming. The other challenges for online merchants because of the surge in sales included their in-house or third party payment processing needs.
Payment transaction data
Whenever a credit or debit card is used by a client to purchase goods or services from an online seller, the payment transaction data is automatically encrypted then transmitted to a payment processor which then relays the required information to the client’s issuing bank to be able to check if the funds are sufficient. If the banking institution approves the payment transaction, only then will the payment processor contact the merchant’s bank for the amount to be credited into their account.
The process takes only a few seconds. However, when there is a sharp rise in payment transactions, it is possible for the system to be overwhelmed if the backup system is not ready. Still, there are many payment providers that did not fail to complete payment transactions even if the number of transactions nearly doubled.
The global economy is still affected by the crisis as even if there was a surge in online payments due to increased retail traffic, the other industries got halted. The e-payment market will still suffer a steep decline especially in the first two quarters of 2020. Among the several reasons include that there were no flights as airports closed their terminals, and most flights are booked using online payments. There were also many businesses that got temporarily closed for a period of a few months, and several of these do accept mobile payments. The crisis accelerated the shift from traditional payment methods to online payments as more people prefer to avoid face-to-face transactions.