Since the introduction of cashless payments, tap pay and Apple/Android Pay the use of cash has been in steady decline. The Covid-19 pandemic now appears to be accelerating its demise. Post pandemic, will cash be a thing of the past as Covid-19 accelerates us to a fully contactless payment future?
Cash withdrawals at ATMs appear to have decreased substantially across Europe in comparison to the position last year, in some cases by more than 50 per cent., and certain governments have adopted measures to sterilise banknotes. On 3 April the Bank for International Settlements released a bulletin, which considers the concerns of transmission of Covid-19 by cash and non-contactless payment solutions such as chip-and-PIN terminals, and on 1 April the UK increased its limit for contactless card payments from £30 to £45 in light of the pandemic, which followed similar increases in other European jurisdictions.
The FCA Insight page has recently published an article exploring who benefits from this shift away from cash and notes that the declining use of cash and the rise of digital payments is a concern for some participants in the economy. Both the Financial Conduct Authority’s 2020 Sector Views and the Payment Systems Regulator’s annual plan and budget 2020/21 acknowledge this and have highlighted access to cash as one of their initiatives for the forthcoming year, particularly access by the unbanked and elderly.
It is clear that at present the movement away from cash could leave some more vulnerable and excluded. Whilst an entirely non-cash society may not be on the immediate horizon, the following factors will be important considerations for market participants, as it is likely that the impact on consumers’ behaviour from the Covid-19 pandemic may be long-term:
- Data usage: the continued consolidation in the payments sector, together with the increased decline in cash usage, may increase regulatory scrutiny to ensure that data is used and aggregated in a manner that does not harm consumers or unfairly lessen competition, particularly where that data is consolidated amongst a small number of participants;
- Cooperation with regulators and other participants: although access to cash is a focus of regulators, regulators are simultaneously seeking solutions to ensure an inclusive digital transition that does not leave behind the most vulnerable in society. Indeed, one of the key objectives of the FCA’s regulatory sandbox is access to financial services, which includes access by vulnerable consumers. It will be an opportunity for market participants if they are able to bridge this divide, whether alone or in collaboration with other participants;
- Accelerated reduction in cash: card payments overtook cash for the first time in 2018 and the Covid-19 pandemic is likely to accelerate this decline both in the present and beyond. For instance, certain bank branches and money remittance counters that were closed in response to the Covid-19 pandemic may not reopen in any withdrawal from lockdowns. If not already, companies should provide online and contactless payment solutions to ensure they do not exclude an increasing proportion of the economy; and
- Access to cash: not everyone has stopped using cash; indeed, large numbers of consumers and SMEs rely on it and regulators have made clear that access to cash is a key focus for them. Ensuring that these participants can still participate in the digital economy is an opportunity for payment providers in designing inclusive payments solutions.
It is clear that the use of cash will continue to fall, and that this decline will likely be accelerated by the Covid-19 pandemic; the actions of market participants and regulators will determine whether everyone benefits from this transition and whether this will be a positive or tumultuous process. Those involved in the payments ecosystem should ensure that they are able and ready to respond to this shift toward contactless payment solutions on an accelerated timeframe, particularly once governments withdraw, staged or in full, their responses to the pandemic.
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