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Effect of Big Changes: The New Concept of Location

Payments 18 May 2020

COVID-19 marks a really big change - and a very fast one.

Really big changes are the ones that affect pretty much everyone world-wide. In the 65 years to the end of 2019, there were probably only three. One was the economic (and political and military) rise of Asia relative to Europe, the Americas and other parts of the world. This began with the Japanese economic miracle of the 1960s and (most recently) has been evident in Chinese investment in Africa and expansionism in the South China Sea. Another was technological change, which gained momentum from the mid-1980s, when personal computers became mainstream in most developed countries. A third was the end of Communist rule in the former Soviet Union and much of Central and Eastern Europe from late 1989.

For most people, these big changes were abstract and gradual. They were not experienced by everyone at once. The liberalisation of agriculture in China at the end of the 1970s was good news for hundreds of millions of peasants, but had little meaning for people elsewhere for years. The Internet became mainstream for people in the UK with personal computers from the mid-1990s, but for many Africans with smartphones from around 2010. The end of Communism was felt much more immediately in Budapest and Warsaw, say, than in San Francisco and Mexico City.

Large numbers of COVID-19 cases began appearing outside China from early March. This was the point at which the virus started to have an impact on most people worldwide, and became a really big change. Two months later, it remains to be seen what will be the main legacy of COVID-19. However, the virus has already changed the concept of location - perhaps permanently.

So, what has happened to the concept of location? Most people globally have been subject to lockdowns of one kind or another and have had to adjust to living, playing and working remotely. Day-to-day life has altered dramatically. Homes have become offices. Travel has been curtailed. Education went almost completely online. Business conferences take place virtually. For businesses that trade with other businesses (B2B), the virus had disrupted supply chains. For many, the goods no longer move where and how they used to. This has also had an impact on some businesses that trade with consumers (B2C). All this has happened in about eight weeks. Relative to the other really big changes, COVID-19 has been a very fast change.

A comparison of COVID-19 with the global financial crisis of 2008-09 provides additional insights. In spite of its name, the global financial crisis was not really global. It had a major impact on some (but not all) large countries in the English-speaking world which had massive financial services sectors. By contrast, the crisis had little impact on Japan, China, India and a number of other places. Policymakers managed to stop the crisis from spreading beyond the financial sector and too far into the world economy - with the result that there was not a global depression.

By contrast, COVID-19 has shuttered businesses and locked down consumers around the world. It remains to be seen to what extent policymakers are able to limit the economic consequences. About the only certainty is that ‘business as usual’ after the virus is properly under control will look (very) different to ‘business as usual’ before the crisis. The new concept of location is the central cause of this shift.

In other words, If ever there were a time for small and medium-sized enterprises (SMEs) that operate through physical shops to build (up) their online presence, this is it. E-commerce gives you the ability to sell to customers who may not be able to leave their homes and who may, in geographical terms, be distant. Goods can still cross-national frontiers fairly easily, even if people cannot. In the B2C world, there are some service providers (such as hairdressers) who have to be in exactly the same place at the same time as the client. In the B2B world, almost all services can be performed from a different location. For service companies, there is a huge opportunity to find new clients and/or to cut costs.

The global financial crisis gave rise to a wave of new regulation. That, in turn, provided an opportunity for innovative FinTechs. COVID-19 should provide opportunities for anyone who is involved with e-commerce - and that includes payments services providers.

E-commerce is only possible if you have the right arrangements in place for payments - which means making them and receiving them. In a recent blog post, we explained how we can help. COVID-19 has had little impact on the way in which Safenetpay operates from day-to-day. We are committed making it quick and easy for businesses to become clients. We are used to working remotely. All our staff are equipped to work from home. Although we did not realise it before the arrival of the virus, we were ready for the new concept of location.

New thinking about location requires new thinking about payments.



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