When Charlie Deeley started selling boxes of cakes from her Devon bakery online this Easter, she hoped to cheer up customers in lockdown and achieve some sales after the shop was forced to shut.

But the digital service proved so popular that now — despite reopening — she has cut the opening hours at her bricks-and-mortar bakery, Big Bakes, to allow time to cater for surging online demand. 

Ms Deeley’s customers are not alone. She has benefited from a new enthusiasm in the pandemic for digital purchases, free from the risk of contagion — together with a zeal for supporting small local businesses through the challenges of coronavirus.

These trends have transferred online billions in payments previously made in person, while people who earlier paid with cards are turning to contact-free methods like digital wallets and QR codes, the black-and-white codes that can be read by mobile phones.

These shifts have boosted payments processors. Ms Deeley’s processor, PayPal, in July reported its strongest quarter since its 2015 split from eBay, with active accounts rising by more than a fifth.

Ms Deeley says: “When we launched our first postal sales, we sold out within minutes of putting the boxes [of cakes] online. We were so, so happy — we never expected it to do so well.”

She and her partner hastily organised online payments using PayPal “because it’s something we had used previously ourselves for buying things”.

The pandemic has transformed how consumers interact with businesses. A survey by market researchers Forrester found 17 per cent of UK and Italian consumers used contactless cards for the first time in the pandemic; in France the figure was 20 per cent.

Over 10 per cent of respondents in each country had paid in-store with their phones for the first time, while 15 per cent in the UK, 12 per cent in Italy and 11 per cent in France had made their first bill payment online or via mobile. 

One question for payments processors now is the extent to which these habits will stick.

Increased use of digital wallet services such as Apple Pay is unlikely to go into reverse, argues Matt Henderson, business lead for the Emea region at Stripe, a rival to PayPal.

“The biggest barrier to adoption of digital wallets is the first usage, so as consumers find themselves in situations where new payment methods are required, perhaps for hygiene reasons, they’ll be more likely to use the new methods again,” he says.

In Europe, new rules on strong customer authentication — being enforced by regulators in 2020 and 2021 — are also expected to benefit digital wallets with biometric authentication, like Apple Pay and Google Pay, he adds.

Other technologies that received a pandemic boost will require widespread acceptance among merchants before they achieve longevity, says John Rainey, chief financial officer at PayPal.

He cites the example of China’s widespread use of QR codes: “If you go to a train station or buy something from a street vendor, a QR code is printed out . . . You need to have saturation in the market before that takes hold. That will take place [elsewhere] over several years, versus several quarters.”

Passengers scan a QR code generated on their phones before entering Shahe station in Beijing © China News Service via Getty

Digital security poses a particular risk where businesses are new to preventing online fraud or data breaches. “As more payments move online, the incentive for fraudsters is even greater,” says Mr Henderson. 

“An independent high street retailer might have learnt over many years how to avoid in-store fraud, from spotting if someone has snuck an item in their pocket, to knowing what a counterfeit note looks like. The online risks are different.”

Stripe and PayPal argue their size is an advantage in fraud prevention, as they can bring vast data sets to bear in spotting suspect transactions.

The looming recession is another threat. Forrester warned the full impact of the pandemic has yet to be felt either by consumers or by payments companies.

“Permanent damage to consumer and business confidence will lead to depressed transaction volumes and collapse of parts of the value chain,” it predicted last month.

Mr Rainey however notes that there has never been a time in the past two decades “when ecommerce volumes have not increased, even through the financial crisis. This has been a secular trend.”

Another trend that has not abated, says Ms Deeley, is appetite for cupcakes among her bakery’s 65,000 Instagram followers. “We’re maxed out,” she says. “We’ve started looking for a bigger kitchen.”



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