It feels like 2020 has lasted twice as long as a “normal” year, but that is mostly due to the rapid-fire changes that businesses and individuals have been dealing with since mid-March. The payments industry was not exempt either, so let’s take a look back at 2020 and how payments were handled before we head into the New Year.
Pandemic Payment Preferences
In the spring and summer of 2020, the US encountered a coin shortage as people stopped using cash to pay for things because they believed the COVID-19 virus could be more easily spread that way.
As shutdowns swept the country, banks and coin depositing stations like Coinstar pulled back their operations. This, coupled with customers’ hesitancy to use coins and paper bills, meant many businesses struggled to keep enough change in their registers.
Because of the shortage, and the perceived sanitation risks, people shifted their payment methods. Cards became king.
Cashless transactions are more beneficial to banks and businesses. Businesses don’t have to worry about taking cash and coins back and forth to the bank, and banks like cashless methods because that means they get a cut of what the consumer spends.
Cashless methods also create more transactions because the “painful” moment when you have to see your money leaving your hand is no longer there. When a customer pays with a credit card, they swipe today and pay in a few weeks when that credit card bill comes in the mail. Debit cards are the same way – customers only see the impact their purchases had on their bank account when they log in or go to the bank and check their balances.
By the end of the year, many businesses and households suffered at least a temporary struggle to make ends meet, and that caused a rise in demand for faster, more secure payment methods. Direct deposit habits increased because the wait times between the payments being issued and them being received was so much shorter.
Stimulus Payments Were Surrounded by Fraud
As banks reduced holding periods for funds and created more and more tech-based financial solutions, the US Government sent out $270 billion in stimulus payments using a variety of payment methods. And the American public noticed that all of the payments submitted and sent via ACH payment processing were deposited and available for use by April 15 – while other payment methods were unable to reach homes and bank accounts until August or even later.
Online payments, due to their accessibility and ease of use, do leave room for other fraud trends to take hold. The general feelings surrounding COVID-19 were based in fear, and fraudsters quickly took advantage of those fears to pressure people into giving up verification or account information, sending wire transfers and other online payments in order to “ensure” they aren’t late on a payment or unable to purchase a hot-ticket item (toilet paper and Lysol cleaning supplies, for example).
Social Distancing and Shutdowns Affect Spending Habits
The 2020 holiday season is a perfect example of the changes affecting the US economy and payment trends. On Black Friday, in-store shopping fell 37% compared with last year. However, consumers spent $9 billion online that same day, which is a 21.6% increase from 2019. And Cyber Monday 2020 set a record for the largest online shopping day ever.
As 2020 comes to a close, the need for faster payment options has increased drastically. That means your future business depends on safe, digital-forward solutions.
Thinking of switching up your payment systems? ReliaFund can help you tailor ACH processing software and other powerful features to create payment flexibility for your business. Contact us to learn more.