A customer makes a so-called contactless payment at the Entrepôt St. Claude cafe in Paris. Photo /Elliott Verdier, The New York Times
The pandemic is propelling a shift toward a cashless society in ways that no other single event has. Experts say that's not necessarily a good thing.
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," Cornu said, 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 favouring 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.
"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 sensitised 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 specialising 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 capitalising 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 $2.5 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 (whose stock is up about 55 per cent this year) and Adyen, based in the Netherlands (up 72 per cent), also stand to gain. 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 per cent, according to McKinsey & Co.
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 euros (about $34), originally intended to prevent thieves from being able to buy large amounts with a stolen or hacked card, were raised to 50 euros or more in France and other countries during quarantine, enticing shoppers to increase the number and value of their purchases.
At Cornu's shop, people started buying an average of 35 euros worth of cheese after the contactless limit was raised, compared with around 10 euros before. Seniors who clung to cash for fear of having a card stolen or hacked started using tap-and-pay to buy just one or two items.
"The fact that the banks and card companies implemented this during confinement, and played on the idea that you don't even have to touch the machine — people accepted it," he said.
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. Visa said it had also worked with governments in Greece, Ireland, Malta, Poland and Turkey to raise contactless payment limits in those countries.
Card companies do not divulge fee earnings, but Jorgensen at RBR said issuers were probably raking in a handsome profit. The European Commission capped interchange fees in Europe last year at 0.2 per cent of a transaction for debit cards and 0.3 per cent for credit after a legal battle with Visa and Mastercard. But the rising volume of swipes helps compensate for the shortfall, he said.
At L'Entrepôt 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 in early June, 90 per cent of all tabs are 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 in a recent study on the effect of Covid-19 on cash use.
Among those hoping to profit from the discomfort is Tappit, a British company that provides data gathering and cashless solutions such as wristbands and apps connected to a credit card for use at festivals, sporting matches and other events with large crowds.
Tappit, which honed its sales pitch during the pandemic to promote "No more dirty cash," has experienced a surge in interest by sporting arenas, hotels and restaurants seeking to revive business quickly after lockdowns, said Jason Thomas, the chief executive.
"Some partners who were slightly fearful of going cashless have now decided this is an opportunity to do so," Thomas said, noting that cashless technology allows lines to move faster and encourages more spending. "The pandemic has kind of ripped the Band-Aid off of going cashless."
Tappit signed 20 million euros worth of new deals in the past two months, more than in any other period.
"These are long-term contracts of between 5 to 10 years," Thomas said. "That tells me that these organizations are never going back to cash."
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 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 toward real cash brought on by the pandemic is unlikely to be reversed.
"Cash is not going to disappear," Jorgensen said. "But it will continue to decline, and Covid is accelerating that trend."
Written by: Liz Alderman
Photographs by: Elliott Verdier
© 2020 THE NEW YORK TIMES
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