Digital Payments Soar Amid Coronavirus Restrictions (#GotBitcoin?)
In Italy, e-commerce transactions have risen 81% since the end of February, McKinsey says. Digital Payments Soar Amid Coronavirus Restrictions (#GotBitcoin?)
Digital-payment services are facing a surge in demand as efforts to stem the novel coronavirus pandemic result in housebound shoppers stocking up on groceries, prescription drugs, audiobooks and movies online.
Many e-payment providers are falling back on contingency plans put in place to handle seasonal bursts in online shopping, such as Black Friday, in part by tapping additional on-demand capacity in the cloud, industry analysts said.
In Italy, one of the first countries to order residents to stay home in a bid to prevent the virus from spreading, e-commerce transactions have soared 81% since the end of February, according to estimates by McKinsey & Co.
As the pandemic accelerates, more regions are enacting similar restrictions, including France, the U.K., New York and California.
“The surge is already happening,” Aaron Press, research director for world-wide payment strategies at International Data Corp., said about the sharp increase in e-payments. He said merchants are dealing with challenges in handling the sheer volume of payment-processing needs, whether their payment services are in house or third parties.
“Our mission has never been more critical,” said Sri Shivananda, chief technology officer at PayPal Holdings Inc., one of the biggest players in the online payment-processing market. Others are Visa Inc., Mastercard Inc., Amazon.com Inc., Alphabet Inc. and Apple Inc.
Mr. Shivananda said the company’s platform was designed to handle sudden increases in global demand. PayPal declined to comment on the impact of the coronavirus on payment-processing volume.
Whenever a customer uses a debit or credit card to buy an item from an online seller, the transaction data is encrypted and sent to a payment processor, which relays the information to the buyer’s issuing bank to check for sufficient funds.
If the bank approves the transaction, the payment processor contacts the seller’s bank to credit their account. The entire process occurs within two seconds.
But unexpected spikes in transactions can overwhelm the system capacity.
In a sign that the internet is reaching a breaking point, Netflix Inc., Alphabet’s YouTube and Facebook Inc. have agreed to reduce video-streaming quality in Europe to avoid broadband congestion.
Dayna Ford, senior research director at research firm Gartner Inc., said despite increased retail traffic, overall revenue in the e-payments market is likely to decline this year, as online retail gains are offset by losses for e-payment firms serving airlines or hotels.
She said the crisis could accelerate the shift to online payments as more services reassess their reliance on face-to-face transactions.