Cash and Crises

A recent ECB paper assesses changes in cash circulation during the Covid-19 pandemic and examines the role of cash as a possible transmission vector of the SARS-CoV-2 virus.

An ECB study belatedly confirms that cash is safe to use despite the SARS-CoV-2 Virus. The SARS-CoV-2 virus lasts longer on stainless steel than on banknotes and euro coins. PVC and stainless steel are more likely to transfer the virus than cash.

Cash in circulation increased in the euro area during the first year of the Covid-19 pandemic. An increase in the precautionary demand for cash more than compensated the decline in its transactional demand. Fears over the role of cash in Covid-19 transmission weighed down on its use in payments.

Riots resulted in the destruction of bank branches and ATMs and the suspension of banking and cash management operations in South Africa. However, industry stakeholders secured business continuity in the provision and circulation of cash.

Cash in circulation grew markedly during the first year of the Covid-19 pandemic in South Africa. The country’s central bank implemented several measures to protect the cash supply chain in times of unprecedented economic dislocation.

Available statistics show that most countries around the world experienced a run for cash in 2020 due to the Covid-19 pandemic.

Myanmar (Burma) is facing a severe cash shortage as the central bank is not providing sufficient cash to meet demand. Queues are growing at ATMs and bank branches, raising fears of a banking crisis.

A survey by the Mexican central bank shows that transactional demand for cash declined during the pandemic. Still, most respondents choose cash as their preferred means of payment.

In 2020, many headlines were predicting the end of cash, amidst a sharp decline in cash transactions. A year later, many recognise that cash plays an essential social and economic role and is an anchor to the monetary and financial system.

Cash in circulation grew 30.33% in Mexico during the Covid-19 pandemic, driven by large-denomination banknotes. ATM transactions declined in volume but rose an impressive 15.9% in value. Mexico’s cash infrastructure has expanded despite the pandemic.

Irish NGO Goal analyses ‘multi-purpose cash and voucher assistance’ and concludes that cash is more flexible, more resilient, and more cost-effective than other forms of financial support.

In Singapore, currency in circulation has grown by 9.5%, despite the Covid-19 pandemic. Food merchants prefer cash, despite the official endorsement of digital payments. Several CashTech solutions accommodate Singaporeans’ preference for cash.