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Cash and Coronavirus – a Communication Challenge

Categories : Cash is a contingency and fall-back solution
April 29, 2020
Published in : Cash, Central Bank, communication, Coronavirus
As the Coronavirus pandemic spreads around the globe, it is changing the way we interact with others and the way we transact. Social distancing, confinement measures, closures of shops and restaurants are changing the way we shop and pay. This article aims to review how central banks and the media have been reporting on the impact of the virus on cash and payments and what lessons can be learnt.
Guillaume Lepecq

Central banks disinfecting and replacing contaminated notes

The People’s Bank of China (PBoC) was the first to announce at a 15 February press conference the issuing of new banknotes as well as policy decisions to disinfect and quarantine banknotes.

“First, we have adopted special measures for cash supply in Hubei Province, which is severely afflicted. Prior to the Spring Festival, the PBoC immediately allocated RMB4 billion of new banknotes to Wuhan to reinforce cash supply for key institutions engaged in epidemic containment such as hospitals.” said Fan Yifei, Deputy Governor. “The cash withdrawn from key areas of epidemic control should only re-enter the market after disinfection with ultraviolet or high temperature and storage for more than 14 days. The cash from other areas, should be stored for more than 7 days after disinfection before re-entering the market.” The PBoC also announced that digital payment service providers had either lowered or waived fees for businesses impacted by the epidemic including medical institutions, charities but also micro and small businesses.

Other central banks have been reportedly taking similar measures to quarantine or disinfect banknotes. Bank of Korea told Reuters “For all cash coming to the central bank from local banks, the Bank of Korea will keep it in a safe for two weeks, given that the virus usually dies out after nine days.” A spokesperson told Reuters that the U.S. Federal Reserve had begun quarantining banknotes repatriated from Asia before recirculating them in the U.S. financial system as a precautionary measure against spreading the virus.

In South Africa, the Reserve Bank issued a statement warning the public against scammers, carrying fake SARB identification, telling the public to hand over banknotes in their possession because they have been contaminated with the virus.

World Health Organisation warns against potential risk of Covid-19

On March 2ndthe Telegraph reported that according to the World Health Organisation (WHO), the Covid-19 coronavirus may be spreading via banknotes and advises against using cash. The Telegraph article quotes a WHO spokesperson as saying, in reply to a question about whether banknotes could be spreading the new coronavirus: “Yes it’s possible and it’s a good question. We know that money changes hands frequently and can pick up all sorts of bacteria and viruses … when possible it’s a good idea to use contactless payments”.

The Telegraph article was then cited by many other media: the Sun, the Guardian, Metro, El Confidencial, the Daily Mail, Finextra and was widely shared on social media.

Digital Payment Providers say go contactless

For digital payment providers, the crisis has provided a unique opportunity to promote contactless payments. In Turkey, BBVA, increased the limit on contactless cards to 250 Turkish lira; in Canada, Desjardins upped the contactless payment limit from CAD 100 to 250; in Ireland, AIB has waived contactless payment fees for Apple pay, Google Pay and Fitbit; in the Netherlands, banks have raised the cumulative limit for contactless payments from EUR 50 to 100. Other markets are taking similar action, including Norway, Saudi Arabia, Egypt, Poland, the United Kingdom and France.

In Kenya, a central bank press release announced a set of measures to facilitate increased use of mobile money transactions instead of cash, with the immediate objective of reducing the risk of transmission of Covid-19 from handling banknotes, but also of reducing the use of cash in the economy over the medium term. In Russia, the central bank has urged consumers and businesses to choose digital payments rather than cash in an effort to slow the spread of the coronavirus and told banks to limit ruble notes in circulation.

The online payments media Digital Transactions, reports how the coronavirus scare is leading some experts to look for a boost in contactless payments. The article states that the WHO warned against using cash.

World Health Organisation denies saying cash was transmitting coronavirus

On March 6, in an article in Marketwatch, Fadela Chaib, spokesperson for WHO contradicted previous statements and claims: “We did NOT say that cash was transmitting coronavirus.” “We were misrepresented.” she added.

The spokeswoman sought to clarify comments in the widely cited article in the Telegraph : “WHO did NOT say banknotes would transmit Covid-19, nor have we issued any warnings or statements about this”. “We were asked if we thought banknotes could transmit COVID-19 and we said you should wash your hands after handling money, especially if handling or eating food.” Doing so is “good hygiene practice,” she added.

A separate article in Euronews also plays down the likelihood of banknotes spreading coronavirus.  “We do not know [how long the virus lasts on banknotes], but we estimate not longer than two hours,” said Stephanie Brickman from the World Health Organization. “The virus will not survive for very long on surfaces, particularly on a dry surface like a banknote,” Brickman added.

It is worth noting that neither the first Telegraph article nor the ensuing clarifications are mentioned on the WHO website. There is no mention of cash on the WHO website.

Central Banks speak out for cash

Some Central started to issue statements in March focusing on three messages: banknotes do not pose a particular risk of infection, the cash supply is secure, retailers should continue to accept cash.

Illustration by Alice Charvet.

Banknotes and coins do not pose a particular risk of infection for the public

On 18 March, Bundesbank Executive Board member Johannes Beermann indicated that the risk of picking up coronavirus via cash is extremely minimal. “The probability of becoming ill from handling cash is smaller than from many other objects used in everyday life. Banknotes and coins do not pose a particular risk of infection for the public.” he said. Moreover, €5 and €10 banknotes, which change hands particularly often as change, additionally have a protective coating against soiling.

The Bundesbank quote René Gottschalk, infectiologist and head of the Frankfurt am Main Health Office: “In principle, it is entirely irrelevant how long pathogens can survive on surfaces.  What is decisive is whether it is an infection channel,” he explained at a press briefing. He saw no such infection channel as existing for banknotes. In addition, banknotes’ physical properties meant that they did not particularly lend themselves to transmitting pathogens.

The Central Bank of Luxembourg added on 17 March that the Eurosystem conducts regular research into the potential impact of the production and circulation of euro banknotes on public health, including in relation to viruses. So far there is no evidence of the coronavirus having been spread via euro banknotes. Germany’s Robert Koch Institute recently confirmed that “virus transmission through banknotes has no particular significance”.

In Austria, the OENB has also issued a statement saying that cash does not pose an increased risk of infection.

The supply of cash is secure

Christian Hawkesby, Assistant Governor of Te Putea Matua – the Reserve Bank of New Zealand said on 19 March “The Reserve Bank and the banking system have plenty of cash on hand to meet demand under any circumstances.” He added “As an example, the Reserve Bank has at least two years’ worth of replacement cash available to feed into the system if required. We can keep cash flowing to and from branches and ATMs in the event of staff shortages or other difficulties anywhere in the cash system.”

Mr Beermann stressed that the supply of cash in Germany was secure even in a crisis scenario. “We have printed more money than we need; our vaults are therefore well stocked.” He added that the Bundesbank has internal contingency and crisis plans and has taken organisational measures at its branches to ensure the supply of cash even in the event of a further spread of the coronavirus. “Cash will not run out in Germany. The supply of cash is secure,” according to Mr Beermann.

The Bank Al Maghrib in Morocco said in a statement on 16 March that it was working with the banking sector to ensure the supply of cash during the pandemic.

Retailers should continue accepting cash

The Bank of Canada is asking retailers to continue accepting cash. Refusing cash could put an undue burden on people who depend on cash as a means of payment. The Bank strongly advocates that retailers continue to accept cash to ensure Canadians can have access to the goods and services they need. 

In Finland, Päivi Heikkinen, Head of the Payments Department at the Bank of Finland wrote on her blog “cash is the primary method of payment for about ten per cent of Finns. For these people, cash may be the only possible method of payment and it is important that they get their purchase done. Even during a corona pandemic, cash can be used as normal”.

The Reserve Bank of New Zealand is also reminding shoppers and retailers to practice good hand hygiene. “Cash is just one of a number of frequently touched surfaces we encounter. The same is true for any other payment device whether it’s a card, phone or watch. This reinforces the need for good hand hygiene regardless of the way you pay or accept payment. Retailers should use common-sense when it comes to cash. Businesses are not obliged to accept cash, but declining it may end up disadvantaging people who rely on its use. These people are more likely to be young, elderly, poor, disabled or financially excluded. Have respect and care for each other,” says Mr. Hawkesby.

The RBNZ has also posted a video on its YouTube channel.

Avoiding a Cash Run

As the pandemic evolves into an economic and financial crisis, there is a growing risk of a flight to safe assets. The question arises however as to whether this will involve cash.

So far there is little evidence this is happening, however several countries have experienced a significant surge in cash demand as consumers have likely increased their precautionary holdings.

In Argentina, according to central bank data, currency in circulation grew by 165 billion pesos between March 7 and April 7. This represents a growth rate of 14% over the past month or 62% over the past year. In the euro-area, the value of euro banknotes increased by €36 billion to a record €1,314 billion. This represents a year-on-year increase of 8% and is the strongest increase since October 2008, following the collapse of Lehman Bros. According to Bloomberg, cash demand has been soaring in Russia. Approximately 1 trillion rubles ($13.6 billion) have been withdrawn from ATMs and bank branches since the beginning of March, more than during the whole of last year.  In the US, currency in circulation grew by over $70 billion between March 3 and April 1, to $1,876 billion, representing a 4% increase. This exceeds the spike that followed the collapse of Lehman Brothers in September 2008.

What lessons can be learnt?

It is all about timing

The virus first appeared in China in December 2019. The first central bank messages stating that cash does not pose a risk of transmitting the disease appeared mid-March. By then, the WHO had given the notorious Telegraph interview and attempted to clarify the initial comments. The damage had been done. 

There is a need to coordinate communications with health agencies

Numerous studies have been published on cash and the risk of infection. National and international health organisations should be reminded of these studies at the early stages of a crisis to avoid misguided communications.

Disinfecting banknotes has sent a confusing message

When media started reporting that some central banks were disinfecting or quarantining banknotes, it leads consumers to suspect that banknotes are contaminated.

Press releases and statements are more important than interviews

In times of crisis – and especially in highly connected societies – it is important to have official and reliable sources of information. Several health agencies have made strong statements supporting cash – the WHO, the Robert Koch Institute… – but they are quoted in articles or interviews rather than posted on the organisations’ websites. The WHO case is particularly disturbing as some media continue to quote the article in the Telegraph while others quote the clarification.

The cash cycle has demonstrated its resilience

In spite of particularly challenging and novel circumstances, the supply of cash has been ensured during the pandemic. In many countries, governments have included the distribution of cash as part of the critical infrastructure industries that must continue operating to ensure public health and safety as well as national security.

 

 

 

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