The digital economy pre-corona virus disease (COVID-19) pandemic was embraced largely by glamourous people who were being driven by a lifestyle of sophistry.
So, it was more of a status symbol, a show practice than a necessity. Despite the various promotional campaigns that pointed to the unlimited products, convenience and the cost-saving attributes of the digital economy, it was only seen as some novel and problematic concept that put people at unnecessary risk.
Then came the COVID-19 pandemic and its various restrictions – the social distancing and shelter-in-place restrictions (lockdown), as well as the economic lockdown that came with these restrictions. One of the initial consequences of these restrictions were panic buying which resulted in crowded markets and supermarkets, increase in prices of commodities and then the scarcity of the various essential and non-essential goods. These happened albeit the fact that the government exempted the essential workers and people who are engaged in the production of food, water and other essential goods.
Those who had converted to the digital economy – e-commerce and e-payment – led their lives without having the pangs of the consequences of those government-imposed restrictions as they went on and got all their basic essentials from the various online platforms that never had a disruption in their service delivery. Other people soon began converting to the digital economy in their numbers, ordering and paying for their needs and services online from the comfort of their homes and had them delivered to them promptly. Even big-time producers like the Coca-Cola, Procter & Gamble, Mastercard etc got converted and tweaked their supply chains to include offering their products and services on the Jumia e-commerce platform.
The reward from the increased digital economic activities was quick for companies in the digital economic space such as those in the e-commerce delivering goods and services to consumers and those processing the payments of these goods through contactless platforms like credit and debit cards. Jumia, Africa’s leading e-commerce platform significant traction month-on-month increase in the number of orders on its platform, a bold indication of the heavy recourse that customers place on them.
In the report of its financial results for the quarter ended March 31, 2020, Jumia recorded huge improvements in all measuring indices over the same period last year, signalling that the e-commerce company thrived in the period of the COVID-19 lockdown.
During the period under review, Jumia gross profit was €18.4 million, a year-over-year increase of 21 percent. The number of annual active consumers on its platform was 6.4 million, a 51 percent increase over the last year’s figure. Customers’ orders grew to 6.4 million, a 28 percent increase over what it was as at 31 March 2019.
Total payment value (TPV) reached €35.5 million, a year-over-year increase of 71 percent, taking on-platform TPV penetration from 10 percent in the first quarter of 2019 to 19 percent in the first quarter of 2020. JumiaPay transactions reached 2.3 million, a year-over-year increase of 77 percent, representing 35 percent on-platform penetration in terms of orders. The company’s operating loss was €43.7 million, a four percent decrease year-over-year.
Although the increase in e-commerce boosted the use of cards and mobile payments in recent years owing to convenience, ease, flexibility, speed and security, the continued COVID-19 pandemic has further increased the use of contactless payments as cash payments increase one’s risk of contracting the disease.
According to new research conducted by Crowdfund Insider in May, 50 percent of U.S. consumers reportedly availed of contactless payment methods at least four times with 69 percent agreeing that this mode is more convenient than cash transactions. Also, 60 percent of U.S. consumers confirmed that these hassle-free digital payments will urge them to continue with the process even in the post-COVID world.
Another research conducted by Capgemini, a consultancy giant and BNP Paribas shows that transactions carried out by people all over the world using digital payment technologies are expected to hit USD726 billion by 2020. This expectation is being driven by the emerging markets’ increasing adoption of digital payment services across all market segments which will bring about an increase in the volume of non-cash payments, according to Christophe Vergne, Capgemini’s Practice Leader (Cards & Payment).
Even though the United States still lags in respect of adopting cashless payments, the country is catching up fast in that direction. In a 2018 study conducted by A T Kearney, a global management consulting firm, just three percent of the cards used was contactless in the country compared to around 64 percent in the United Kingdom and 96 percent in South Korea.
One major fallout of the COVID-19 pandemic is the paradigm shift it has brought about in people’s lifestyle. More and more people are having more recourse to e-commerce subsector of the economy, shopping and paying for the goods and services online. What seemed to be a luxury thing is now embraced as a necessity, and there is no gainsaying, the converts, having tasted the convenience and cost-saving attributes, will move back to their old ways of physical shopping and cash payment systems. The digital economy has now become the new normal.