Boosting economic recovery by harnessing the power of payments

COVID-19 is having an unprecedented impact on the global economy, with almost every sector experiencing major disruption and setbacks. For the financial services, 2020 was a year of significant growth following radical shifts in the way businesses had to adapt to changing consumer spending habits.

Moving towards a cash-free society

One of the biggest trends that came from 2020 in the UK was the move to cash-free. And we will undoubtedly see this grow even further in the coming months and years.

One of the biggest challenges in 2020 was the distribution of funds backed by the UK government’s various schemes

While the future of payments has long been touted as cashless, in 2020 this became a reality, with contactless card payments replacing cash in an effort to reduce spreading the virus. This is now the clear favourite method when it comes to paying in the UK, as consumers continue to demand quicker and more secure ways to pay with shops keeping their physical spaces closed.

This will act as a diving board for society to move to a cash-free zone. By harnessing contactless payments, merchants can make payments easier and safer for consumers, minimising concerns when it comes to purchasing products and services. And for businesses right now, this is of utmost importance as enabling convenient transactions in-store and online will be key if they are to survive the challenges ahead.

Swifter transactions and less downtime

One of the biggest challenges in 2020 was the distribution of funds backed by the UK government’s various schemes; Bounce Back Loan Schemes, Furlough and Eat Out to Help Out to name a few. Several businesses complained they did not receive loans quickly enough. However, it’s mainly lenders who have borne the brunt of scrutiny for their role in distributing these vital funds.

With a shift to digital payments, we are now starting to see lenders adopt open banking to manage the significant influx of loan applications. This allows lenders to check affordability and assess credit worthiness quickly; as well as provide them with fast and secure access to funds. All made possible thanks to having instant access to a company or individual’s financial information in near real-time. This is exactly what lenders need to keep the system fair during this challenging time.

And if we are to speed up our economic bounce back, swifter transactions between lenders and their clients, will mean far more businesses will receive their funds quick enough to survive, and thrive, as we face this new normal.

Open finance will gather more momentum

Open finance will be one to watch this year. While the UK is the birthplace of open banking and has always been ahead of the rest of Europe when it comes to banking innovation, the adoption of open banking in the rest of Europe, and the world, has been taken one step further through open finance. We are already seeing this in Brazil, Canada and Australia for example. This trend will accelerate this year, and we will see the UK start to re-take the lead in open finance.

Navigating post-Brexit Britain

Setting the pandemic aside, the other significant milestone the UK economy has to handle this year is life beyond Brexit. With a deal now reached, businesses have to put into action the plans they’ve been working on over the last few years, ensuring the right measures are in place to continue trading with minimum disruption. From moving staff to different locations to re-licensing in the EU, most businesses pulled out all the stops to ensure they remained compliant whatever the outcome.

However, these businesses also need to consider their payment strategy if they want to excel and transition with ease. In the first half of the year we will see volumes of requests from businesses to onboard open banking increase. Offering swifter payments solutions, will enable them to position themselves for success post-Brexit, which in turn will improve the UK’s recovery over time.

The UK remains a hotbed for payments innovation and broader fintech. While radical shifts in consumer spending and behaviour has undoubtedly had an impact on the wider financial services landscape, UK businesses can fuel economic recovery by adopting these forward-thinking trends.