GLOBAL PANDEMIC PUSHES US CLOSER TO CASHLESS FUTURE
Our cash-free future is getting closer with new habits
PARIS» On a typical Sunday, patrons at Julien Cornu’s cheese shop used to load up on Camembert and chèvre for the week, with about half the customers digging into their pockets for euro notes and coins.
But in the era of the coronavirus, cash is no longer à la mode at La Fromagerie, as social distancing requirements and concerns over hygiene prompt nearly everyone who walks through his door to pay with plastic.
“People are using cards and contactless payments because they don’t want to have to touch anything,” said Cornu, as a line of mask-wearing shoppers stood 3 feet apart before approaching the register and swiping contactless cards over a reader.
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 toward 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 are favoring clicks over cash to reduce exposure for employees. China’s central bank sterilized 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.
“Time to swap your coins for payment cards — safer for containing coronavirus,” Valdis Dombrovskis, the European
Commission vice president for financial services, wrote on Twitter as Europe imposed quarantines.
Cash is certainly not dead. Before the pandemic, bills and coins were used for 80% of the transactions in Europe, and there are few signs that the pandemic is about to wipe it out.
Yet for a growing number of people sensitized by COVID-19 quarantines, cash is a fading routine.
“We’re living through an amazing global social experiment that is forcing governments, businesses and consumers to rethink their operating models and norms for social interactions,” said Morten Jorgensen, director of RBR, based in London, a consulting firm specializing in banking technology, cards and payments.
“We have a world in which there is less contact,” he said. “People’s habits are changing as we speak.”
Those dynamics are creating a golden moment for credit card companies, banks and digital platforms, which are capitalizing on the crisis to advance the cashless revolution by encouraging consumers and retailers to use cards and smartphone apps that yield lucrative fees. In Britain alone, retailers paid 1.3 billion pounds (about $1.7 billion) in third-party fees in 2018, up 70 million pounds from the year before, according to the British Retail Consortium.
Payment and processing companies such as PayPal and Adyen, based in the Netherlands, also stand to gain, and their stock prices have risen considerably this year. So do data analytics and fraud prevention companies, and businesses that enable merchants to accept card payments.
Propelling the trend is a surge in online shopping as homebound consumers turn to digital tools for basic items. 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%, according to McKinsey & Co.
At L’Entrepôt SaintClaude, 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. For the first few weeks since the restaurant reopened in early June, 90% of all tabs were paid by card, a jump from three-quarters before France went into quarantine in mid-March.
Back then, Mades was paying about 300 euros 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 behavior by users and firms,” the Bank for International Settlements said.
Consumer groups warn that vulnerable people risk being marginalized. 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.
“Cash is not going to disappear,” Jorgensen said. “But it will continue to decline, and COVID is accelerating that trend.”