Cash substitution

Although the world of contactless payments has exploded in Australia, for some cash remains the payment method of choice.

By removing frictions and the pain to pay, digital payments increase consumer spending, particularly on unhealthy foods.

During the Covid-19 pandemic, Mexicans did not switch en masse to CoDi, the central bank’s mobile payments platform launched in 2019. Cash continues to dominate retail payments.

Restaurant and bar workers in Spain have long relied on cash tips to complement their wages. The acceleration of digital payments during the pandemic threatens their economic livelihoods. #Cashtipsonly.

Payment preference is a luxury that half the world’s population can’t afford. For those who can, preferences often reflect individual benefits rather than social good.

For Mastercard CEO Ajay Banga, financial inclusion will be a critical part of post-Covid-19 economic recovery. He recognises that cashless “is something we are not going to get to and probably shouldn’t”.

The Italia Cashless initiative rewards those who do not use cash for their purchases. Users of credit cards, debit cards and payment apps will receive a refund of a part of their expenditure from the state.

The pandemic has boosted revenue for many players in the digital economy. But both Visa and MasterCard have seen their revenue decline during the pandemic.

As in other countries, Australia has seen an increase in currency demand and a decline in cash payments during the pandemic. The Reserve Bank is considering policy options to ensure competition and resilience in the payments market. This could lessen the profitability of retail payments.

The economic fallout of the pandemic is still in its very early stages, but the visible signs are spectacular: some industries have grinded to a complete halt; unemployment has risen massively; transaction volumes have dropped as consumers are increasingly in lockdown. So far, the impact on cash demand varies significantly from country to country.

As Sweden's Riksbank announces it has begun testing an e-Krona, Aleksi Grym, Head of Digitalisation at the Bank of Finland offers a reality check on ongoing developments with Central Bank Digital Currencies.

Earlier in November, a Greek draft tax bill proposed to lower the limit for cash payments in from €500 to €300. The ECB declares that the threshold is disproportionate in light of the potentially adverse impact on the cash payment system.