Cash is no longer king in times of COVID-19 Raining on cash’s reign

COVID-19 has fundamentally changed our behaviours in a matter of weeks. We’ve shifted to remote working, online shopping and trying out our culinary skills at home with varying degrees of success. When we do venture out, we keep our distance, sanitise our hands and limit human contact including when paying for purchases. Although the Swiss are reaching for their Francs far less and scanning their cards and mobile much more, it will take more than a pandemic to shift us to a cashless society. 
In April, we surveyed 1,500 individuals living in Switzerland to ask about what payment methods they were using for their supermarket purchases in light of COVID-19. April was also when major payment providers such as Mastercard, Visa, Postfinance and American Express temporarily increased the limit for contactless card transactions to CHF80 without having to enter in PIN details and touching the payment terminal. And whilst cash was always accepted at shops around Switzerland, the managing director of the Swiss Retail Federation advised its members to request customers to pay with digital or contactless alternatives.

Oh, what a difference a few years make, or does it?
This isn’t the first time Deloitte gauged the payment behaviours of the Swiss. Back in 2017, Deloitte’s Goodbye wallet? Hello, smartphone study concluded that although smartphones were unlikely to replace cash payments over the next few years, the shift to mobile payments would certainly gain momentum. Fast forward to 2020 to payments in times of COVID-19 and we are seeing more people use digital and contactless payments. Of those surveyed, over one-third of respondents have increased the number of digital payments or contactless payments with debit cards at supermarkets. Over 50% of respondents either have reduced payments with cash or are forgoing cash altogether. When it comes to smartphone payments, only 41% of respondents never used this method, which is a marked change from our 2017 survey where 83% said they never paid with smartphones. From a cleanliness perspective, according to SRF, paying with cards and above all smartphones are safer.

Chart 1: Have card, will purchase. Has the coronavirus changed how you pay for your purchases in supermarkets?
From a generational perspective, there are some differences, as one would expect. Those over 50 are least likely to now use contactless payment via smartphones (e.g. Twint, Apple Pay, Samsung Pay, PayPal app) or visit the self-checkout kiosks in the supermarkets with 56% and 44% never using this option respectively. Under 30s have increased their use of contactless debit card payments (38%), debit card payments (33%), credit card payments (31%) and contactless payment via smartphone (27%). Whether older generations are reticent to try something new or don’t see the need to adopt new payment methods, with only one per cent paying with smartphones for the first time, for example, needs further study. Of the youngest generation surveyed, seven per cent tried mobile payments for the first time. It will take more than hygienic reasons to get our seasoned seniors to scan their e-wallets, which is why retailers only benefit from offering a variety of payment methods, both traditional and innovative, to bridge any generational payment preferences.

Necessity is the mother of invention
Whilst no new payment methods have yet emerged from COVID-19, the pandemic has seen consumers forgoing cash in favour of contactless and digital payments. History bears this out back in 2003, according to the World Economic Forum (WEF), digital payments and e-commerce launched in China in response to the SARS epidemic to avoid unnecessary human contact, which only grew in its aftermath.
Because much is still unknown about COVID-19, including its lifespan on various surfaces, a number of central banks including China, the US and South Korea have been cleaning banknotes by methods such as ultraviolet light and high temperatures, even going so far as to quarantining banknotes for two weeks before putting them back in circulation.
Moreover, cash may be slowly ending its reign on the global stage in general. As reported by Forbes, the central banks of both China and France are working on a digital yuan and euro respectively, whilst the US has been discussing a digital dollar for quite some time and Sweden is running an e-krona pilot project until the end of 2020. The momentum is there; payments are becoming more digitalised, not only on a micro-level but also on a macro level. One thing is certain, the advantages of digital and mobile payments will survive the crisis and we will see an increase in digital payment adopters and converts. Given the challenges facing retailers, providing customers with more options to complete purchases would be in the best interest for businesses.

Getting your e-commerce house in order
“Seamless” is not a fancy buzzword; it is increasingly what customers expect, particularly in the retail space. COVID-19 has prompted a number of traditional brands and retailers to improve their e-commerce offerings, technology and website user-friendliness to respond to the increase in online shopping. Making the customer’s lives easier doesn’t stop at the virtual shopping cart. Retailers will be more likely to earn a customers business, and Francs, by giving them a large variety of payment methods, auto-fill billing and delivery details and one-click purchase at the touch of a fingerprint or with facial recognition. Cultivating customer goodwill by way of a quick and seamless shopping experience, both in-store and online will pay off in the end in the form of loyalty and repeat purchases. There is still a long way to go until we have a fully cashless society and too early to say whether the tendency to reach for our credit cards and e-wallets is a fundamental shift or rather borne out of necessity to limit contact with people and potentially germ-laden money. According to a BBC story, when even our cash loving German neighbours are changing their behaviours in the form of digital or contactless payments, anything is possible.

Keep your card on guard
Although COVID-19 has obliged people to favour cards over cash, it also highlighted our dependence on cash, which is why we’re unlikely to abandon banknotes anytime soon. Not everyone is comfortable with the idea of a cashless society, particularly the more conservative Swiss. When it comes to data protection, cash is reliable and unhackable (provided it isn’t counterfeit). The metaphor of keeping cash under the mattress to protect yourself from financial loss is more acute when faced with a crisis and economic uncertainty. Central banks, governments and ill-intentioned individuals can access digital forms of wealth far easier than the physical kind. Though we’re unlikely to face expropriation and taxation at the hands of the government in a financially stable country like Switzerland, it can be an attractive concept for more totalitarian regimes who are pressed for funds or indebted to international lenders.
There is genuine concern that electronic payment methods can expose people and their data to fraud or misuse, particularly with payment apps. Phones can be hacked. Apps aren’t 100% secure. Nefarious groups took advantage of the COVID-19 crisis to step up cyberattacks with more of the population working from home and customers considering unfamiliar e-commerce sites to purchase goods and services. In April, cyber attacks such as phishing, fraudulent websites or direct attacks were three times higher than normal according to the Swiss National Cyber Security Centre (NCSC). However, digital wallets do score points here since it’s much harder to commit transaction fraud when biometric authentication, either by fingerprint or face scan, is required to complete purchases.
Although the use of contactless cards and e-wallets will continue to grow, we will continue to see a mix of payment options in the future regardless which payment methods are currently preferred. Many Swiss still reach for their rappens when making smaller purchases and over 50% still pay for purchases with invoices. We are unlikely to see the Swiss go the way of some 4,000 Swedes who have implanted microchips in their arm to pay for purchases in a very sci-fi way. Nevertheless, banks and payment providers should be fast-tracking their digital innovation efforts and ramping up their analytics and data management tools. As more customers shift to digital and mobile payments, there will be greater demand for security, privacy and control of one's data. This will be paramount as these newer payment methods aim to dethrone cash’s long reign.