Impact of COVID-19 on Cash And Online Payment Industry

Across many countries where the latest strain of COVID-19 tends to make an impact, social distancing and isolation have been put in place. Employees have been asked to work from home, cities have been placed under complete lockdown and educational institutions have been shut down, as if they never existed.

Cash as a Medium of Exchange, Loses Its Dominance
We all thought and strongly believed that cash will always be around, but it looks like COVID-19 is making us get some perspective on a lot of things, including this.

The fact that hand-to-hand exchange of cash or physical currency might transmit the virus, majority of the countries around the world are reconsidering the use of cash. In fact, it won’t be wrong to say that Corona Virus has turned out to be a catalyst in bringing digital payments into the mainstream.

For instance, China decided to abolish thousands of banknotes or disinfect them in order to stop the virus from spreading, at least in the short run. SCMP recently reported that a local branch of the People’s Bank of China has been destroying paper money that was circulated through high-risk settings in Guangdong province, such as food markets and hospitals.

South Korea also seemed to follow suit, while in the US, the Federal Reserve began to store banknotes coming in from Asia before they are recirculated back into the economy.

On the contrary, Canadians tend to go with a completely different approach. There are rumors that some people there have been shoving the banknotes into washing machines to get rid of Corona Virus, as their paper money is made of plastic. And, that is taking money laundering to a whole new level!

A Shift Towards Digital Payment Platforms
Ever since the lockdown, the frequency, as well as the total monetary value of transactions, has dropped. However, with people only buying necessary goods and storing them in one go, the value per transaction has increased more than ever before.

So, whichever part of the world you are, now is the perfect time for making the best of shopping carts and payment gateways. Having that said, apart from China, Canada, and the US, as mentioned earlier, here’s what others are doing:

Britain:

The use of cash in Britain has halved in just a few days after the imposition of a nationwide lockdown by the government. Even the stores that sell essential day-to-day use of goods and services are trying to avoid taking paper money. For transactions of GBP30 (~$40) and under, the majority of the stores tend to accept contactless payment, either by mobile payment or credit and debit card, for instance, Apply Pay.

Russia:

As far as Russia is concerned, where the official cases of Corona Virus seem to be low as compared to other countries, a lockdown is still instituted in Moscow and other major cities in the country. And, this leaves the country to rely on online payments and discourage the circulation of banknotes.

Australia:

In Australia, the basic amenities outlets and stores have also encouraged their customers to go with the online payment methods and avoid touching EPOS machines as much as possible.

Kenya:

Other emerging regions, such as Africa, known to be having the largest unbanked population in the world, is also taking measures in the global pandemic and emphasizes to make greater use of contactless payments.

M-Pesa, the dominant player in Kenya, is all set to waive fees, and hence the daily transaction limit has increased from Ksh 70,000 (=$660) to Ksh 150, 000 (=$1400).

Until 2018 or even 2019, digital payment adoption was quite slow and only was seen to be more in use by developed countries. Reasons being, demographic, cultural, and technological barriers-many of which were a function of economies at different stages of development. However, since the adoption is now made mainstream, due to the uncertain longevity of Corona Virus, getting onto the bandwagon and choosing an online payment solution is the step towards a better and a safer future.