China is the epicenter of the coronavirus (Covid-19) pandemic and its impact on the country’s payments industry is that cash transactions will see significant decline while card payments continue to grow over the next four years, according to GlobalData, a leading data and analytics company.
GlobalData’s report, ‘Covid-19 Impact on the Payments Industry: China Forecast Snapshot’, predicts the growth rate for the value of cash transactions before and after the pandemic to drop from a compound annual growth rate (CAGR) of 5.0% to -4.3%, between 2019 and 2023.
The shift in annual decline is already being seen due to a rise in online shopping and larger food orders for stockpiling. Similarly, contactless payments are much safer than cash ones in the current climate and the World Health Organisation (WHO) urged consumers to use cards.
GlobalData forecasts the value of card transactions to rise in China up to 2023, but the post-Covid-19 amended forecasts see a CAGR drop to 10.0% from 11.8% (2019-23f).
Ravi Sharma, banking and payments analyst at GlobalData, comments: “GlobalData has revised its forecasts for payment card transactions value and volume data for the next five years, anticipating a steep reduction in projected growth for 2020, which will ultimately recover but not to previously forecast levels. This is due to the impact in the short to medium term of what is looking likely to be a global economic recession.”
The most severe drop in cash payments is set to be in 2020, where GlobalData forecasts it to drop by CNY3.2tr.
Sharma concludes: “This huge change will see consumers become more comfortable with a range of digital transactions, including online, card and even mobile payments. It is likely to shift consumer behavior so that even when cash payments are safe again they will continue to see gradual decline in value and volume.”