HomeNewsHow has the coronavirus affected the payment industry?
How has the coronavirus affected the payment industry?

How has the coronavirus affected the payment industry?

Last updated
Affiliate Disclosure

The coronavirus pandemic has caused havoc around the world. According to the International Monetary Fund (IMF), the world is facing the worst economic crisis since The Great Depression of the 1930s.

The numbers show the impact. In the United States, the unemployment rate has surged to almost 15 per cent and more than 38 million people have registered for unemployment benefits. In Europe, the unemployment rate is rising as the manufacturing and services sector experience their worst slowdown in modern history.

With millions of people out of work, the remittances industry has been affected. According to the World Bank, remittances will drop to $445 billion this year. That is a 20 per cent decline from the previous year. The biggest declines will be in Europe and Central Asia, followed by Sub-Saharan Africa, and South Asia. Let us look at how the coronavirus pandemic has affected the payment industry.

Traditional payment companies suffer

A closer look at the performance of companies shows that traditional firms have been affected by the slowdown in remittances. A good example of these are Western Union and MoneyGram

In the first quarter, Western Union’s revenue declined by 1 per cent and the company withdrew its previous guidance. In the earnings call to analysts, the company’s CEO said that while the first two months were solid, problems started to emerge in March, when the coronavirus was declared a pandemic. According to the management, the consumer-to-consumer transactions dipped by 30 per cent. Similarly, in April, transactions fell by 21 per cent.

MoneyGram’s story was the same. In the earnings call, the CEO lamented that its consumer-to-consumer business declined by between 40 per cent and 100 per cent in some countries.

Modern payment platforms thrive

While traditional remittance-focused companies struggled, modern organisations did well. A good example of this was PayPal, one of the biggest payment companies in the world. In the first quarter, its daily number of transactions rose by more than 25 per cent. At the same time, the number of active accounts increased by 7.4 million, leading to a 20 per cent jump in revenue.

Square is another new-age payment processor. While the company initial focus was in business transactions, it has grown its consumer-to-consumer business with the launch of CashApp. In the first quarter, while most traditional payment companies declined, Square’s revenue grew by 44 per cent. In its presentation, the company said that CashApp added its largest number of net-new transacting active customers.

Another payment company that has thrived during the coronavirus pandemic is Adyen.

Final thoughts on the payment industry

Payment Industry

The divergence between modern and traditional payment companies can be seen in their stock performances. Adyen, PayPal, and Square shares have jumped by 44 per cent, 37 per cent, and 28 per cent, respectively. On the other hand, MoneyGram and Western Union shares have dropped by 12 per cent and 29 per cent, respectively.

Are you thinking of sending money nationally or abroad? At MoneyTransfers, we can help you get the lowest fees by comparing hundreds of payment providers.

Crispus Nyaga
Crispus Nyaga
Crispus is a financial analyst with over 9 years in the industry. He covers the stock market, forex, equities, and commodities for some of the leading brands. He is also a passionate trader who operates his family account. Crispus lives in Nairobi with his wife and son.