In the latest issue of Deutsche Bank’s konzept magazine – whose theme is the world post-coronavirus – she opens a section entitled ‘Cash is not immune to the virus’ with the premise: “Covid-19 might be the catalyst that finally brings digital payments more fully into the mainstream. That is because the global spread of the virus is forcing countries to reconsider the use of physical money, which might transmit the disease.”
Concerns over handling cash have added to the impetus for central banks to create their own digital currencies, or CBDCs, which have already been in development over the past couple of years. “Today, 80% of them are developing a CBDC and the work goes far beyond research: 40% of central banks are experimenting with proofs of concept and 10% are already running pilot projects,” reports Laboure. “Looking ahead, countries representing about a fifth of the world’s population are likely to issue a general purpose CBDC in the next three years.”
The People’s Bank of China (PBOC) is at the forefront of these initiatives and has begun trialling some very low-profile payments in its new digital currency – reportedly with both Starbucks and McDonalds on board. In a separate article, Online grocery: fad or fate, konzept looks at the upsurge in demand for grocery shopping online since the pandemic began.
Analyst Nizla Naizer notes: “Given the nature of the crisis, where social interaction can lead to the virus spreading faster, it is natural that people look for options to source food without having to physically enter a supermarket.” The pandemic’s impact has prompted several grocers who haven’t previously offered online purchasing options – such as Aldi in the UK – to begin doing so.
From a fairly low level, adoption of and familiarity with ordering online was already beginning to improve pre-Covid-19. It’s likely that pandemic will further accelerate the trend and if fewer consumers return to the stores when more normal conditions return, the use of cash is likely to further decline.
The rate at which it does so will vary from country to country, Sweden, which some years ago announced the end of cash, aims to become the world’s first cashless society by March 2023. Progress towards this goal was helped by the 2012 launch of the payments app Swish, which has the backing of the country’s main banks and is used by two in three Swedes.
Today, cash in circulation represents only 1% of GDP – against 11% for the Eurozone and 8% for the US. In February Sweden’s Riksbank announced the launch of a year-long pilot of its own digital currency, the e-krona, which take it nearer to the creation of the world’s first CBDC – although the Riksbank describes it as a “complement to cash” rather than a replacement.6
By contrast, Deutsche Bank’s research suggests that Americans and Western Europeans are much more dependent on cash. “It takes much longer to change the ingrained habits of people in a legacy system,” comments Laboure. “In terms of disease control, this could be a significant problem, especially in cash-based societies where populations are ageing, such as the US or Germany.” (Even in Sweden there are still rumblings of dissent that the drive to cashless neglects the needs of the elderly, people living in rural communities and workers on low wages.)
Figure 2 – Popularity of cash