When cash is no longer king

Hygiene concerns amid the pandemic accelerate shift towards a cashless future

A customer makes a contactless payment in a cafe in Paris. The shift in attitudes towards real cash brought on by the coronavirus pandemic is unlikely to be reversed.
A customer makes a contactless payment in a cafe in Paris. The shift in attitudes towards real cash brought on by the coronavirus pandemic is unlikely to be reversed.PHOTO: NYTIMES

On a typical Sunday, half of the patrons at Mr Julien Cornu's cheese shop in Paris will be digging into their pockets for euro notes and coins. But in the era of the coronavirus, cash is no longer a la mode at his shop, as concerns over hygiene prompt nearly everyone to pay with plastic.

"People are using cards and contactless payments because they don't want to have to touch anything," he said. While cash is still accepted, even older shoppers - his toughest clientele when it comes to adopting digital habits - are voluntarily making the switch.

Cash was already being edged out in many countries as urban consumers paid increasingly with apps and cards for even the smallest purchases. But the coronavirus is accelerating a shift towards a cashless future, raising new calculations for merchants and enriching the digital payments industry.

Fears over transmission of the disease have compelled consumers to rethink how they shop and pay. Retailers and restaurants prefer clicks over cash to reduce exposure for employees. China's central bank sterilised bank notes in regions affected by the virus. And governments from India to Kenya to Sweden, as well as the United Nations, are promoting cashless payments in the name of public health.

Cash is certainly not dead. Before the pandemic, bills and coins were used for 80 per cent of the transactions in Europe, and there are few signs that the pandemic is about to wipe it out. Mr Morten Jorgensen, director of RBR, a consulting firm specialising in banking technology, cards and payments, said: "We have a world in which there is less contact. People's habits are changing as we speak."

Those dynamics are creating a golden moment for credit card companies, banks and digital platforms. Payment and processing companies such as PayPal (whose stock is up about 55 per cent this year) and Adyen, based in the Netherlands (up 72 per cent), also stand to gain.

Propelling the trend is a surge in online shopping. In the United States, 40 million customers went online for groceries in April. In Italy, where cash is king, the volume of e-commerce transactions has surged more than 80 per cent.

Credit card issuers are keeping the momentum rolling by working with banks and governments to lift ceilings on contactless payments that allow shoppers to avoid touching a keypad. Limits as low as €20 (S$31), originally intended to prevent thieves from being able to buy large amounts with a stolen or hacked card, were raised to €50 or more in France and other countries during quarantine, enticing shoppers to increase the number and value of their purchases.

Visa reported a surge in contactless payments for basic items in Britain after limits there were lifted and a 100 per cent increase from a year ago in the United States.

At L'Entrepot Saint-Claude, a cafe near the cheese shop, owner Emmanuel Mades expected higher contactless payment limits to increase the amount of the fees he pays for card use. Since the restaurant reopened early last month, 90 per cent of all tabs have been paid by card, a jump from three-quarters before France went into quarantine in mid-March. Back then, Mr Mades was paying about €300 a month in card fees.

With more people switching to contactless cards for even small bills, his expenses are likely "to rise significantly", he said.

There is no medical evidence that cash transmits the virus. Nonetheless, “perceptions that cash could spread pathogens may change payment behaviour by users and firms”, the Bank for International Settlements said in a study on the effect of Covid-19 on cash use.

There is no medical evidence that cash transmits the virus. Nonetheless, "perceptions that cash could spread pathogens may change payment behaviour by users and firms", the Bank for International Settlements said in a study on the effect of Covid-19 on cash use.

The authorities that manage the world's currencies say the dangers of going fully cashless are rife. In tech-forward Sweden, cash has been disappearing so fast that Parliament and the central bank asked commercial banks to keep bills and coins circulating while they figure out what a cash-free future would mean. Consumer groups warn that vulnerable people risk being marginalised. Many low-income earners and retirees, as well as some immigrants and people with disabilities, have little or no access to electronic payments and are increasingly shut out as banks cut back on ATMs and customer service. Central banks are looking at whether electronic currencies can replace physical cash. The Swedish Riksbank is testing a pilot version of a digital krona, or e-krona, that could keep the functions of a currency backed by the state.

"In certain economies, there is still a role for cash, because it continues to provide a benefit and a utility," said Mr John Velissarios of Accenture, which is helping to manage the Riksbank's test. "That's where the concept of things like digital central bank money is interesting."

While virtual euros and dollars are still a ways off, the shift in attitudes towards real cash brought on by the pandemic is unlikely to be reversed. "Cash is not going to disappear," Mr Jorgensen said. "But it will continue to decline, and Covid is accelerating that trend.

NYTIMES

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A version of this article appeared in the print edition of The Sunday Times on July 12, 2020, with the headline 'When cash is no longer king'. Print Edition | Subscribe