Britain has fallen behind other countries like Sweden when it comes to removing physical money from its economy. However, the COVID-19 outbreak might change that.
Cash is no longer king. Or at least the use of physical money is dropping as cashless solutions around the world are becoming more popular with development countries growing their percentage of cashless payment market the most, according to research from Capgemini’s researchers found that developing markets are leading the growth in the non-cash payment sector. Russia, India and China are the three countries in the world where this market is growing the fastest.
Europe is, however, still at the forefront of the trend, with one in two store payments across the continent being made with contactless solutions in 2018, according to Mastercard. The adoption rate vary though, with Sweden often being hailed as the frontrunner when it comes to embracing the solutions. Only 13% of Swedes used physical money for their last purchase and 60% thought that they might have used it sometime in the last month, according to a 2018 report from Sveriges Riksbank. The UK has, by comparison, fallen behind with 28% of all payments in 2018 being made with money, according to UK Finance.
Yet, some believe that the coronavirus could increase the adoption of cashless solutions in Britain. Before the pandemic encouraged a country-wide shutdown of all non-essential commerce, high street retailers like Ted Baker, Costa Coffee and some branches of H&M discouraged the use of physical money out of fear of spreading the contagion.
As such, some experts believe tools that enable digital payment will become more popular across the British isles.
“[The] coronavirus brings a new dimension to the benefits case: physical wellbeing,” Amy Gavin, a researcher at 11:FS, the financial services consultancy, told The Telegraph. One that is likely to change consumer spending habits for good.”
Over the past few weeks, FinTech companies such as bitcoin exchanges and challenger banks have made similar reflections.
When crypto company Coino announced the launch of its new bitcoin wallet in collaboration with Italian neobank Hype, its co-founder and co-CEO Vincenzo Di Nicola argued that people are “becoming more and more cautious of coins and paper money, since there is a fear these may spread the disease.”
Similarly, German challenger bank N26 told FinTech Global had noticed a growing number of card and digital money transfers as the coronavirus has spread.
However, Gavin warned that the adoption of the new methods could come at the expense of vulnerable parts of society. “The real crux of the cashless society debate is not about personal preference, it’s about the fundamental importance of fairness and inclusivity,” she said. “Those groups include rural communities without access to reliable internet and mobile coverage; the unbanked; the elderly; those with physical or mental health issues who struggle to handle cash, as well as people with a history of debt problems.”
Many of these face the risk of being excluded if Britain moves too quickly towards becoming cash-free.
But some argue that cutting out cash to fight coronavirus will have little, if any, effect on tapering the spread of the deadly disease. The World Health Organization had, The Telegraph noted, so far not issued any official polices in regards to how money could spread the pandemic.
Nevertheless, while the use of cash may drop during the lockdown of Britain, some believe it may return with a vengeance once the crisis pass.
“Memories are short, I would draw parallels with how quickly the banks went back to risky lending after the financial crisis,” John Cronin, a financials analyst at stockbrokers Goodbody, told the Telegraph. “Also people will feel more comfortable again once this is over and go back to interacting in the same way they have done in the past.”
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