The COVID-19 pandemic has sparked a surge in e-commerce and accelerated the adoption of electronic and mobile payment methods. As a result, payment startups have emerged as major winners during this time. Online shopping, contactless payments, and mobile payments were already popular prior to the pandemic, but the global health crisis and subsequent lockdowns have propelled their usage even further.

According to Marc-Henri Desportes, Deputy CEO of Worldline, a French payment and transactions processing firm, the shift to electronic payments and online shopping has been significantly expedited in 2020. This has created a highly profitable opportunity for payment startups to thrive in the market.

Among the startups that have benefited greatly from this trend, Stripe stands out. Founded by two Irish brothers in 2011, Stripe’s valuation has skyrocketed to $95 billion, almost tripling since the previous year. However, it still has ground to cover in order to catch up with industry giants like Mastercard, which holds a valuation above $300 billion. To further enhance its valuation, Stripe recently secured $600 million in funding.

SumUp, another startup that provides card payment terminals and online services, has successfully raised 750 million euros in funding. Additionally, Paris-based Pledg, specializing in installment payment services, has managed to raise 80 million euros. The rapid growth of these startups exemplifies the potential for success in the payment industry.

Experts predict that global payments revenue could increase by $500 billion by 2025, reaching a staggering $2 trillion. Though established players such as PayPal, Apple Pay, Visa, WeChat Pay, and Alipay currently dominate the sector, the success of startups like Stripe suggests that the COVID-19 pandemic might create more opportunities for fintech companies to gain market share.

Furthermore, the potential for lasting changes in consumer behavior must be taken into account. Matt Palframan, Director of Financial Services Research at YouGov, raises the question of whether consumers will revert to their pre-pandemic habits or if the behavioral changes observed during the crisis will persist. This aspect is crucial for startups like Stripe, as they heavily rely on sustained changes in consumer behavior in order to maintain their momentum.

In addition to payment processing, fintech companies that offer complementary services such as multifactor authentication, loyalty programs, and installment payments are also gaining popularity among retailers. These firms rely on high transaction volumes to become profitable, as they charge low commissions for each transaction.

It is not only payment startups that stand to benefit from these payment innovations, but retailers as well. Once customers have registered their payment details in an electronic wallet or app, they are less likely to switch to other payment methods easily. This fosters loyalty and stability for retailers, minimizing the risk of losing customers.

Overall, the e-commerce boom and the shift towards electronic payments have presented significant opportunities for payment startups. While established players still dominate the industry, the success of companies like Stripe showcases that there is room for new players to thrive. Keeping a close eye on the long-term effects of COVID-19 on consumer behavior and the continued growth of fintech companies will be crucial in the years to come.

Useful Links:
1. Stripe Official Website
2. Worldline Official Website