Our ways of working were not the only thing to change dramatically during the crisis. Our consumption habits also evolved. Online, remote and contactless payments were part of a series of protective measures we adopted. And these new tools are likely to continue to increase in importance in the future.
Is it safe to pay in cash? Can we catch COVID-19 by exchanging notes and coins? Whereas for a long time worries were focused on the safety of digital payments, during the pandemic fears switched to the risk of transmitting the virus via cash, which has not been established. This change resulted in broader consideration of payment methods generally and, in particular, the role of cash. In addition, as behaviours changed during this period, banks were forced to innovate to keep pace.
Innovation is the key to meeting new requirements
During the health crisis and lockdown, banks had to come up with ingenious ways of continuing to serve their clients and offer new digital solutions suited to clients’ new payment habits.
Banks topped up their range of products, adding to secure messaging services and online banking platforms for managing day-to-day business and transactions (account consultation, credit transfers, requesting electronic documents or bank cards). They provided clients with new solutions and apps to enable them to make payments on the best terms possible without using cash or even, in some cases, a bank card.
Clients who had previously been reluctant to use digital payment solutions made the leap in droves. Some banks offered online tutorials to advise and reassure those clients who were not very familiar with these new practices and tools.
With lockdown and the closure of some shops and restaurants, online purchases exploded.
Online purchases were the major winners in the crisis
With lockdown and the closure of some shops and restaurants, online purchases exploded. During the first stage of the pandemic, 85% of Luxembourg internet users made purchases in this way. Like many consumers, maybe you too avoided large stores and discovered the joys of click and collect. You did your shopping online, paid remotely and then all you had to do was visit a pick-up point at the store or have the goods delivered. Luxembourg is also very well covered by a network of POST Pack Up points.
Worry-free contactless payments
The remote payment solutions that were broadly adopted during the crisis cannot be used in all situations. Direct payment is still preferable when you make a purchase in a shop or order a delivery from a restaurant. Rather than handling cash or entering your PIN you might prefer to make contactless payments. This option has been available on all credit and debit cards in Luxembourg for several years and has seen a constant rise, with a real boom during the crisis. The limit for secure contactless payments has been raised to from EUR 25 to EUR 50. Close to 70% of card payments in Luxembourg are now contactless.
However, there is a cumulative ceiling for the number and value of consecutive contactless payments in a given period. Above this you will need to enter your PIN for security reasons.
Biometric mobile payments: all you need is a touch or a look
These are even easier, quicker and fully secure! Making a payment with your smartphone or smartwatch using Apple Pay, Garmin Pay or Fitbit Pay has never been quicker or easier. Once you have activated your card in your wallet, you just have to move your phone towards the payment terminal (as with a contactless payment) and confirm your purchase with biometrics or your PIN. All done in a few seconds! No limit is planned for such payments, except of course that of your bank card.
Other free and secure mobile payment solutions available only in Luxembourg, such as Payconiq, have also found favour with consumers in recent months. These tools let you autonomously manage store purchases, bills, deliveries and money transfers. Each payment made using these apps just requires your approval using your digital fingerprint, PIN or Face ID.
European citizens are in favour of a digital euro that is secure and guarantees the confidentiality of their transactions.
Cash versus the digital euro
Will such digital channels replace cash? According to an ECB report, European citizens are in favour of a digital euro that is secure and guarantees the confidentiality of their transactions in the same way cash does. This digital currency of the ECB would enable rapid and reliable payments at no extra cost using bank cards or smartphones. However, the aim is not to replace cash, but to supplement it. So this isn’t yet the end of paper money.
According to the ECB, 73% of payments in euro zone shops are still made using cash. In Luxembourg, they still represent 54% of payments.
Cash was broadly shunned during the health crisis, and its use has been declining year by year, but it’s not about to disappear (just yet). However, online and contactless payments are likely to continue to gain ground as an increasingly prominent habit in the years to come.