Contactless payments surge amid pandemic

Growing demand for 'in-home consumption' changes market strategies

The unprecedented coronavirus pandemic, which broke out in late December 2019 and has now engulfed the world, portends to reshape our lives, and the world order as we know it. This is the first of a series to cast light on the changes that might lie ahead. ― ED.

By Lee Min-hyung

The COVID-19 pandemic has had a significant impact on how people shop and make payments. More people are opting for in-home consumption and embracing contactless payments, which is changing the marketing strategies of major credit card firms.

Some argue that the stay-at-home economy will be only a temporary phenomenon once the COVID-19 shock subsides. But the local card industry expects this trend to continue as online and mobile sales increase among the younger generation.

According to data from the Credit Finance Association, online credit payments for eight major card firms surged in March to 10.03 trillion won ($8.35 billion), up 22.3 percent from last year. The figure for offline transactions declined by 10.4 percent to 30.7 trillion won during the same period as people stopped shopping at stores due to social distancing.

One retail market tracker, Wise App, also showed that more people were buying from home using their mobile devices. Data indicates that the transaction volume for food delivery apps increased 44 percent in March, compared to January. Internet and home shopping payments also rose 29 percent during the same period.

“Prior to the COVID-19 pandemic, I preferred to shop in-person because I could check products before making a decision. However, the pandemic has forced me to shop online because of possible infection,” said a 34-year-old working mother surnamed Lee asking for her full name not to be used.

“After two months, I concluded that mobile and online shopping was as satisfactory as going out to shop at stores,” she added. “I think I will continue to shop online even when the coronavirus outbreak dies down.”

People have also increased spending on internet services, with the government encouraging firms to adopt telecommuting in response to the virus. Payments for internet-based services, such as entertainment content on Netflix and YouTube, increased 22 percent from January to March, according to Wise App.

This is changing marketing strategies for the local card industry. Until now, most card firms have promoted card use by offering offline discounts at major supermarkets or convenience stores.

“The online subscription economy has recently become a trend in the card industry after the coronavirus shock increased demand for in-home consumption,” said one card industry official. “Major card players will continue enhancing their non-contact marketing channels in the post-pandemic era.”

Another card industry source said the shift in consumption patterns from offline to online will accelerate even after the pandemic ends. “Regardless of the virus shock, most leading card firms have identified in-home consumption as one of the most noteworthy spending patterns. But the spread of the virus will likely further boost moves by market players to launch more products by incorporating their services with home-consumption content providers.”

Starting this year, leading card issuers are rushing to roll out new cards that provide benefits for customers of streaming services or popular mobile apps. In February, Hyundai Card launched its Digital Lover card whose key feature includes offering a subscription fee discount of up to 10,000 won per month for digital streaming services such as YouTube Red or Netflix.

Shinhan Card is offering users up to 6,000 credit points for using digital subscription services. Samsung Card offers a discount of 5 percent on Netflix and food delivery apps with its Samsung Card 2V4, released in February.

Analysts believe the COVID-19 pandemic will convince smaller businesses to embrace the digital transformation. “The digital transformation has served as a building block for the recent growth of the non-contact lifestyle,” Hi Investment & Securities analyst Lee Sang-heon said.

“Following the pandemic, companies which have been slow in accepting digital initiatives will actively push for digital transformation,” he added.