Pandemic accelerated digital payments adoption by three years: Square

September 22, 2020.

Payments fintech found that the shift to cashless payments, which received a jump-start in the pandemic, is likely around for the long term, based on an analysis of data from its millions of customers.

In a report published Tuesday, San Francisco-based Square said that non-cash payments, which hovered around 60% of transactions conducted by its customers last year, rose to 63% in February and to 67% in April, then stayed at that level through August.

The data showed that after an initial spike, cashless payment methods have stabilized, demonstrating that payment trends accelerated by the pandemic are continuing, according to Square.

The company said it has “seen increased in-person transactions, causing the share of cashless businesses to stabilize since they peaked in April. That said, there has still been a remarkable increase in cashless adoption rates compared to pre-pandemic, coupled with a notable drop in the share of cash payments.” 

Though the trend was less pronounced in the U.S. than in other countries, Square still estimated that “this recent shift away from cash usage would have taken more than three years without the pandemic.”

The share of businesses that did 95% of transactions through cards, apps and other cashless methods roughly quadrupled from March to April, reaching around 23%. After the initial shock, that ratio found its level from June to August, when it smoothed to about 13%. 

The trend was also visible in the percentage of businesses that adopted online payments, which rose 13.2 percentage points from February to 40% by August; 70% of businesses were accepting contactless payments by that time, a 6.6% percentage point increase over the same period. 

Zelle and PayPal showed similar results in recent months, with PayPal saying it had a 22% increase in transactions in April and added 20.2 million new users in the first quarter alone. 

Banks and credit card companies have been quick to adapt to the trend. Last week, Mastercard teamed with U.K.-based fintech Handpoint to provide cashless payments to small businesses in Europe, and Visa built out online checkout services in Canada. Visa and PayPal also collaborated on a payment service. Fintech investment in general has shifted toward payment services.

Although the U.K. and Australia were quick to go cashless, with a greater initial spike and higher plateau in the ensuing months, the U.S. and Canada showed a smaller increase. Japan, which had the lowest percentage of cashless businesses out of those five countries, showed essentially no move toward businesses going cashless, according to Square.

--Additional reporting by Beth Newhart