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Charlotte Hogg

June 2020

Charlotte is executive vice president and chief executive officer for Visa’s European operations, with more than 25 years of experience in financial services, bank operations and management consulting.

 

3 - 4 Minutes

Spending in a crisis: What European payments can tell us about the nature of the recovery

The COVID-19 pandemic has transformed the way we all live.

Government interventions that could have been debated for years have been crammed into days. Decades-long shifts in human behaviour have been compressed into weeks, spurred on by unprecedented restrictions on movement. With lockdowns now lifting around Europe, the question of what kind of a recovery we will see looms large. There are almost more theories about the shape of recovery than there are letters in the alphabet and I don’t plan to add to them. What I’d like to do is reflect on its nature and the implications of that.

Evidence from countries across Europe indicates a real and meaningful change in consumer behaviour took place during recent months that suggests the recovery will be digital first.

That began when we saw cardholders shifting more spending online as the pandemic took hold and nations implemented lockdowns.

Differing approaches

Differing approaches to lockdowns appear to have made little difference to this pattern. Common themes emerge from Sweden, Italy and others over the period from February to May, when consumers began buying online more frequently, in a broader range of sectors, which in turn increased the share of total spending on ecommerce.

Firstly, consumers increasingly used cards online for their everyday spending. For example, for many in lockdown, online grocery shopping became an essential service. In both Sweden and Italy, consumers shopped online for food and groceries more often. Despite the lighter touch of the approach to lockdown in Sweden, there was a nine-fold increase in consumers shopping 5x a week online. Italy has seen a doubling of consumers shopping at least once a week online, and in the UK there has been a doubling of those shopping 3x a week or more.

Secondly, we saw online activity accelerating significantly in some sectors, perhaps revealing that people are now buying a broader range of products and services online. Home improvement purchases grew strongly as consumers spent more on their immediate surroundings. In Sweden, online furniture and equipment online purchases doubled; in Italy the spend in garden supply stores tripled between the last week of February and the first week of May, when the Italian government took its first steps on the road to easing the lockdown. Transactions for household appliances more than doubled. In the UK, cycling enthusiasts tripled their online purchases.

Similarities

It’s possible to pinpoint other similarities in spending habits between consumers grappling with strict lockdowns, and those in Sweden, who were given guidance about how to slow the spread of the virus while enjoying more freedoms. Those similarities suggest movements towards spending more online on the home, on digital gaming or shopping for groceries will continue through the early stages of the recovery at the very least.

Finally, the proportion of total spending on ecommerce has grown. In Italy, where ecommerce was less prevalent, the rate of increase has been the highest of the three countries studied. This trend is confirmed by Nexi, who provide acquiring, issuing and payments services, and have seen an increase in demand from e-commerce platforms wanting to improve their ability to support online and multi-channel payments. Nexi also said that many merchants who do not yet have their own e-commerce websites have expressed an interest in accepting online payments.

Across the board, some of the greatest shifts to online spending have been in clothing purchases, traditionally a transaction made in-person. In Belgium and Ireland, for example, more than 40% of cardholders who rarely made online purchases between January 2019 and early March 2020 began doing so regularly.

Digital recovery

Stepping back, what can we conclude from this?

It’s clear that consumer behaviours have changed, likely permanently. Those changes suggest the recovery will be digital, whether that be via the sustained increases we’re seeing in online shopping across Europe, or through contactless payments that enable consumers to abide by social distancing recommendations and regulations that are likely to be with us for many months ahead.

That means all businesses will want to respond by offering digital experiences and payments in order to benefit most from the recovery. It’s vital, therefore, that small to medium sized businesses receive the support they need to implement this, as they will be the engine of the wider recovery.

We have seen a real appetite to engage from small businesses. For example, in Germany, Deutsche Bank, Postbank and Visa helped match-fund vouchers bought on community social media platform nebenan.de for people to spend with their favourite local shops and restaurants once the lockdown had been lifted. And in the UK, we partnered with ShopAppy, a digital marketplace that has helped small businesses reconnect with their customers online while restrictions have been in place.

It’s inspiring to see these stories and I know there are many others like them.

In conclusion, we’ve learned from countries where cash usage has been in decline for several years that a move to paying online or by contactless is likely to be permanent. Once it’s possible to pay online or via a simple tap for services like taxis, for example, people rarely go back. It looks increasingly like the pandemic has sped up that process.

Consumers have changed and it is incumbent on all of us in our industry to change with them.

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