Payments 3.0: Covid-19 Is a Call for Investment

The Covid-19 pandemic is a mandate for making investments in customers, employees, and corporate infrastructure. The pandemic has caused many new problems, but even more so it has shown that old problems need to be addressed more than ever before.

Long-recognized concerns in financial services have become acute problems under the pandemic. Two examples, one from the customer perspective and one from the corporate perspective, show how this has happened.

First, on the consumer side, a statistic we have been hearing for years is that many Americans do not have enough cash to cover an unexpected $400 expense. That came from the Federal Reserve’s May 2016 study, “Report on the Economic Well-Being of U.S. Households in 2015.” Then, in 2019, a survey from Bankrate found that only 40% of Americans could cover a $1,000 emergency expense without borrowing, consistent with a range of 37% to 41% in similar surveys from 2014 to 2018.

While there were discussions and pilot programs for financial health, credit card debt hit an all-time high in February. Now most Americans are facing an economic emergency with high outstanding debt and little to fall back on. We are seeing reports like the one from the National Multifamily Housing Council that shows 69% of households had paid their rent by April 5, compared with 81% that paid by March 5, and 82% that had paid by the same time last year.

Second, on the industry side, when we think about things from the corporate perspective, the example of COBOL shows how a problem we have known about for a long time has become urgent. COBOL is an old computer language that banks, government agencies, and others still use.

This story has been brought out every so often, almost as a curiosity piece. In April 2017, Reuters ran a story entitled “Banks scramble to fix old systems as IT ‘cowboys’ ride into sunset.” In September 2018, The Wall Street Journal wrote a piece entitled “Do You Know Cobol? If So, There Might Be a Job for You.” Both pieces talked about how older programmers could make good money, help solve problems, and spend time with their grandkids.

Now we see headlines like this one from Popular Mechanics: “Why the Government Is Desperate for Programmers Who Know This Old Language,” and from The Hill, “NJ seeking help from COBOL programmers in coronavirus fight.” As record numbers of people apply for unemployment, knowledge of this language has gone from a profitable niche to a pressing need.

The Covid-19 crisis provides an opportunity to address these and other longstanding issues. The crisis may cause companies to pull back from spending and taking risks, but they can’t cut their way to growth. Returns come from investments, not cuts.

Companies can take the lead in helping individuals and the economy recover from the stresses of this virus. It is time to invest in customers to help them maintain their financial health through efforts like giving them a clear picture of their current financial situation and how they can improve it, extending terms, and offering flexibility for customers waiting on money from relief payments, unemployment, and other resources.

It is time to invest in business infrastructure and employees to gain efficiency and new tools to address the needs of the crisis. While that might not mean installing new core systems, it might mean training programmers and making plans for a switch.

Don’t let a good crisis go to waste. Use it as a tipping point to make the changes that will solve the problems that have been with us all along.

—Ben Jackson, bjackson@ipa.org