The mythical ‘war on cash’ is not new and is well documented in economic literature. While the term “war” may not be appropriate – particularly when the world is waging a war against a virus – there is no doubt that the financial gains associated with the digitalisation of money and the colossal amounts of consumer data extracted from payments behaviour constitute solid motivations to join the battle.

The Pandemic has increased and diversified hostility towards cash

The authors of the paper, E. Beretta from the Institute of Economics in Switzerland and D. Neuberger from the University of Rostock in Germany, argue that cash had been previously accused of facilitating illicit transactions and that the pandemic had created laboratory-like conditions, as well as new health-related justifications, to accelerate the drive away from cash. However, the fact that cash demand has surged during the crisis – often at unprecedented levels – shows that the approach is flawed and that cash is not replaceable.

The report reviews a number of policy measures adopted around the world, prior to as well the pandemic, to nudge consumers away from cash.

COVID-19 must (and should) not become a war on cash

The authors conclude, that “cash remains an inclusive, privacy-preserving, public means of settlement”. Attempts to restrict its use or eliminate cash altogether, would create a “monopoly power of the private banking and financial system”; this, in turn, would have far-reaching implications in terms of financial exclusion, social discrimination as well as growing inequality which would only be aggravated by the economic recession.  The pandemic has been accelerating the pace of digitalisation and its well-known side effects, the digital divide and the loss of privacy. “In sum,” plea the authors, “COVID-19 must (and should) not become a war on cash.”