Mexican Central Bank: Transactional Use of CashMoney in physical form such as banknotes and coins. More Declined during the Pandemic

According to a December 2020 survey on the use of means of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More by Banco de México, 93% of the target population (representing 66.9 million Mexicans) used cash in transactions before the Covid-19 pandemic. However, after the pandemic, 86%  (equivalent to 61.9 million Mexicans) reported using less cash in payments.

The 86% result is higher than the 58% of respondents who said they used less cash in Mastercard’s “Payments, Commerce and Life After the Covid-19 Quarantine” report. According to Gabriela Ugarte, director of Mastercard Digital Solutions in Mexico and Central America, respondents in Mastercard’s survey said they were using less cash due to restrictions and lockdown measures and beliefs that cash was a Covid-19 transmission vector.

But Payment Cards’ Use Declined as Well

Cash was not the only payment instrumentDevice, tool, procedure or system used to make a transaction or settle a debt. More whose transactional use diminished in 2020, as respondents reported using other means of payments less as well. For example, before the Covid-19 pandemic, 28% of the target population used debit cards; that number has diminished to 26% after the pandemic. And 14% of the target population said they used credit cards before the pandemic: the number now stands at 11%.

Measured by aggregated transactions data with debit and credit cards from point-of-sale terminals (POSAbbreviation for “point of sale”. See Point-of-Sale terminal. More), consumption in Mexico fell 23% for the April-June 2020 quarter (Campos-Vázquez, Esquivel 2020: 5). Globally, Mastercard’s revenue dropped by 14% in 2020 to $3.84 billion.

According to the National Banking and Securities Commission (CNBV), Mexican cardholders cancelled 1.13 million credit cards between March 2020 and March 2021. Mexicans are cancelling their credit cards to reduce expenditures and increase their saving, given the historic GDP fall of 8.5%, its biggest fall since 1932.

Marginal to Slight Increases in Electronic Payments

Respondents to Banco de México’s survey reported using the Sistema de Pagos Electrónicos Interbancarios (SPEI, Interbanking Electronic Payments System) and Cobro Digital (CoDi, Digital Charging) more frequently.

For example, before the pandemic, only 0.5% of respondents (representing 400 thousand people) regularly used the SPEI; this number increased to 4% of the target population (or 2.5 million people). Likewise, none of the survey respondents used CoDi regularly before the pandemic; now, 0.9% of the population (700 thousand people) say they are using it to make payments.

Cash and Bank Infrastructure

Regarding the demand for cash and bank infrastructure, 33% reported going less to ATMs, whereas 26% reported going more to withdraw cash from ATMs. A plurality of 48% reported going less to bank branches, whereas 13% said they were going more to their banks. A plurality of 39% reported going less to convenience stores to make banking transactions, and 17% reported using these services more frequently.

Banco de México data shows that ATM transactions’ volume declined 2.9% during the first year of the Covid-19 pandemic. Still, ATM transactions’ value and average ATM withdrawals increased by 15.9% and 19.5%, respectively. In addition, the number of ATMs also grew 1.3%, primarily ATMs in bank branches (2.1%). Cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknot... More grew 30.33% in Mexico during the Covid-19 pandemic, driven by precautionary demand as a store of valueOne of the functions of money or more generally of any asset that can be saved and exchanged at a later time without loss of its purchasing power. See also Precautionary Holdings. More and reserve amid crises.

Personal Versus Online and Mobile Shopping

A plurality of respondents (46%) reported they still shopped the same in person, compared to 32.7% who said they were shopping less in person. In municipalities with less than 50,000 inhabitants, a clear majority of 53% said they were shopping the same in person. Similar percentages of respondents said they were shopping more via mobile apps and online platforms, with 29% and 32%, respectively.

Mexicans Still Prefer Using Cash as a Payments Instrument

A large majority of Mexicans prefer to use cash in most transactions, according to the 2018 National Survey on Financial Inclusion. The Banco de México survey found that most respondents used cash as their preferred payments instrument before (76%) and after (65%) the Covid-19 pandemic. Out of those surveyed in the report, 72% believed that banknotes and coins were transmission vectors of Covid-19; only 39% saw a similar risk with debit and credit cards.

• In transactions of up to MX$500 (US$25.24), a clear majority of people prefer to use cash, both before (71%) and after (65%) the Covid-19 pandemic.
• In transactions of between MX$500-MX$1,000 (US$25.24-US$50.47), the number of people preferring cash went from a majority of 53% before the pandemic to a plurality of 45% after the Covid-19 pandemic.
• In transactions over MX$1,000 (US$50.47), a plurality of 42% before the pandemic preferred to pay in cash; the number shrunk to a smaller plurality of 38% after the Covid-19 pandemic.

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