Earlier this month we highlighted how COVID-19 is changing how people use cash around the world, and questioned if changing spending habits would ultimately drive us to a cashless economy? Many retailers have already embraced new digital solutions for payments and some had already removed cash from the payment menu entirely.
COVID-19 has certainly accelerated this trend as consumers have move away from using cash in fear over potential virus transmission. The World Health Organisation even acknowledged in the early stages of the pandemic that banknotes may be spreading the new coronavirus and that people should try to use contactless payments instead. But, cash is still seen as an easy solution and one that provides anonymity of payments and is why the transition to a cashless society remains a complex journey.
Our report highlighted that the technology needed to go cashless is already available, but needs to be seamlessly integrated into everyday life before it is more widely accepted as the new normal and cited YouGov research from Jun-2020 and Jul-2020 that illustrated the spending habits across 21 countries and regions. It showed that at least half of respondents in a third of the locations have been using cash less often because of the COVID-19 pandemic.
The shift towards a cashless society has been given a “10-year boost” by the coronavirus pandemic, according to Anne Boden, CEO of UK challenger brand Starling Bank. Speaking at a technology conference in early Dec-2020, she said: “Like it or not, money is digital… they’re zeros and ones… we have this very old-fashioned concept of having notes and coins. And I feel that the evolution towards cashless has been given a 10-year boost in the right direction.”
In fact, the small Pacific nation of Tuvalu has announced plans to not just go cashless but fully digital and paperless, migrating infrastructure such as banking, currency management, and business dealings onto the Bitcoin SV (BSV) ledger.
But is a move to a cashless society a reality? The age-old saying ‘cash is king’ still rings true even if recent trends show that there is an increasing tendency and trust in the digital payment solutions. However, COVID has certainly influenced short-term thinking – globally, the volume of ATM cash withdrawals fell at double-digit levels in the second quarter of 2020 as infection rates increased around the world, according to research firm MoffettNathanson.
The likelihood is that while the coronavirus pandemic will have influenced some, many people revert to old habits and the reduced use of cash may only be a short-term tremor. The ten year boost by Ms Boden on towards a cashless world are seen as a significant exaggeration by many and research by the International Monetary Fund has found that typically, cash use declines by -1.4% a year on average. Travel technology specialist Amadeus acknowledges that this could mean we’ve seen four years’ worth of digital payment transformation since the COVID-19 outbreak.
Still, regardless of the period, the shift in short-term habits is clear. The Amadeus Travel Payments Guide 2020, a new study that examines traveller payment trends across the world, conducted in partnership with payments infrastructure provider PPRO, shows that a high majority (84%) of respondents confirmed that since the start of the outbreak they now pay with non-cash methods like contactless or mobile payments when travelling.
Notably, 14% of respondents said that when contactless payment options are not available, they would abandon the purchase altogether, rather than risk the physical contact required to pay with cash. The transition to modern payment methods has led to an overall reduction in cash usage for on-trip services like food, beverages, and attractions of around 6%, according to Amadeus.
However, the shift away from cash does not look like it will be a permanent move. The survey found more than half respondents (55%) said that they plan to return to cash payments when the risk from Covid-19 has significantly reduced. The high costs for using cards abroad being one of the most cited reasons for the return to cash usage.
When it comes to booking travel, the research shows that over a third of travellers (37%) said that the option to pay with non-card methods or e-wallets, was the most important factor when booking a service related to travel. In addition, almost a quarter (24%) said that the option to buy now and pay later was an important factor when booking a service related to a trip.
The prevalence of this payment method varies depending on the market, but it is a particularly popular choice in Asia Pacific, and especially Chinese markets, with 44% of Chinese travellers and 21% of Asia Pacific travellers saying they’ve used this method to finance a purchase.
Regardless of the impact of COVID-19 on concerns of physical contact, cash looks like it will make a return. This potential return demonstrates the growing need for the travel industry to offer a wider range of digital and local payment methods, tackling travellers’ concerns around hidden costs and security if it is to successfully complete its migration. It looks like cash will remain king!