The coronavirus pandemic has transformed our lives, turning the way we work and interact upside down. Amid conflicting research on how long the virus can survive on surfaces, it is also changing the way we conduct transactions, and, as a result, is further bringing into question the ongoing need for cash.
Businesses are currently indicating a clear preference for contactless payments rather than physical exchanges of notes and coins that could possibly spread the virus.
Public transport hubs are leading the way. Queensland’s Translink announced1 that from 25 March 2020 bus, train, ferry and tram services in South East Queensland (including school bus services) would only accept pre-paid tickets to reduce cash handling and would no longer accept cash payments at train station ticket windows.
Already on the path
This deliberate move away from cash for health and safety reasons is in fact part of a much larger trend we highlighted in our September 2019 white paper2. In that paper we discussed the rapid decline in cash payments and the need for businesses to have a strategy to address the increase in the cost of managing cash. Cash has become a high fixed cost but a low volume form of tender and the time may well be now for businesses to reconsider the need for cash in their operations.
As the paper noted, Australia is the world’s sixth most cashless society and The Reserve Bank of Australia’s 2019 Consumer Payments survey3 – completed before the pandemic – confirms the continuing fall in cash use. According to the survey, in 2019 just 27% of all consumer payments were made with cash, compared with 37% in 2016, supporting projections that we could become Asia-Pacific’s first cashless society by 2022.
CommBank’s analysis of Visa and Mastercard data confirmed digital wallet transactions (CommBank Tap & Pay, Apple Pay, Google Pay, Samsung Pay, Fitbit Pay and Garmin Pay) rose 17% in March to $1 billion, easily outpacing the average monthly compound rate of 4.4% over the past six months. The average spend was $28, confirming the shift away from cash for transactions of all sizes.
Health concerns paramount amid conflicting views
The trend towards cashless transactions is global and the coronavirus appears to be hastening that trend. In the UK, cash usage dropped to 50%4 just days after lockdown as people reacted to the possibility of catching or transmitting the virus.
Likewise, in the US, a spokesperson for the Federal Reserve confirmed to Reuters5 that it “has begun quarantining physical dollars that it repatriates from Asia before recirculating them in the U.S. financial system as a precautionary measure against spreading the virus”.
But indicative of the conflicting research, a leading information source used by central banks, published an article on March 206 noting that while “some central banks have already chosen to quarantine banknotes”, research conducted during the 2006 bird flu outbreak (another strain of coronavirus) suggests “that as little as 10% of coronaviruses were still present after four hours”.
Global phenomenon as people’s behaviour changes
Nevertheless, the health concerns among consumers and retailers alike, have seen contactless payment limits rise around the world. Dutch banks’7 limits doubled to €100, with the Dutch Food Retail association urging customers to opt for contactless payments whenever possible. Norwegian banks followed. In the UK contactless limits were lifted to £458 (from £30). MasterCard supported contactless limit increases in 29 European countries, while Canada9, Ireland10 and India11 have announced similar initiatives to decrease the use of cash.
On 3 April, Australian Payments Network, (the self-regulatory body for the payments industry) increased PIN limits. It said “increasing the PIN limit for contactless card payments from $100 to $200 to slow the spread of coronavirus. It will help Australians stay safe and confident when shopping for essentials12”.
A global consumer survey by Mastercard13 from April 2020 confirmed this switch to contactless payments, with 46% of survey respondents confirming they had swapped their ‘top-of-wallet card’ for one that offers contactless.
Is the change permanent?
The last decade has seen a major shift of focus for businesses to have the best interests of their customers at the heart of everything they do. The pandemic has highlighted that the bare minimum is the continued health and wellbeing of customer and staff in interactions.
If you’re tempted to say of the coronavirus that “this too shall pass”, concerns are already growing about the potential recurrence of this virus. Beyond this immediate threat, the UK’s Health Secretary has warned14 that known viruses show increasingly that "Antimicrobial resistance is as big a danger to humanity as climate change or warfare”.
With an effective vaccine still months away, people’s migration from cash will become entrenched. In the same Mastercard global consumer survey13, 74% of people said they would continue to use contactless payments after the pandemic is over.
So, while many businesses are currently intently focused on survival, many are also considering what their business will look like once the pandemic eases. There is no better time for businesses, with the support of their customers and staff, to permanently remove high cost and increasingly low volume of cash from the point-of-sale.
How can we help?
On a case by case basis, dependent on client need, we conduct Design Thinking workshops to tackle challenges, using a proven framework to develop and consider potential solutions, from moving to a cashless business, developing seamless customer experience, or what your business looks like post COVID-19. Contact your CBA Relationship manager for further information.
About the Author
Elise Fairbairn is the Managing Director of Transaction Banking Solutions, Institutional Banking & Markets at Commonwealth Bank. Elise has extensive experience in the banking industry, spanning a variety of senior roles that have covered operations, front-line client relationship management, strategy, leading large-scale business transformations, client research and transactional & trade, sales. Find out more about her on her LinkedIn page.