Fear of coronavirus infection through cash can change payment behaviors. The implementation of digital payment methods could affect the unbanked.

According to the researchers from the Bank for International Settlements (BIS), the coronavirus could accelerate the adoption of digital payments and sharpen the debate over central bank digital currencies (CBDC).

The researchers issued their forecast in BIS’ April 3 Bulletin. They say that the coronavirus is changing the public’s relationship with cash. However, the scientific community has agreed that the transmission of the coronavirus through paper money is relatively unlikely.

The BIS researchers explained that, whether or not the concerns are justified, the perception that cash could spread pathogens could change the payment behaviors by users, as well as those by companies.

First of all, countries could expand the digital payment infrastructure with more online, mobile and contactless options after the coronavirus pandemic. However, digital adoption measures could have a severe impact on millions of unbanked elderly people.

If people do not normally accept cash as a payment method, this could open a gap between people who have access to digital payments and those who do not. Despite acknowledging that cash may reappear, the researchers stated that the coronavirus pandemic also demands the use of CBDC.

Replacing Cash with Digital Payments

Central bank digital currencies could become a bridge between the society’s need for digital payment methods and its responsibility towards those who cannot easily access them.

Some of the caveats are that central banks will have to design their CBDC so that they fit the context of the current crisis, by allowing contactless and globally accessible payments, according to the researchers.

In that respect, the demands for CBDC would be more reasonable as a consequence of the coronavirus. This disease also highlights the current value of having access to various payment methods, as well as the need for any payment method that allows resilience to a wide range of threats.

Some politicians already note that the BIS researchers’ prediction is true. Jorge Capitanich, governor of Argentina’s Chaco province, in an April 1 teleconference on the coronavirus with President Alberto Fernández, called for a digital currency transaction system to replace the use of cash.

After three different proposals explained a bank-operated digital central system, including one by US Senator Sherrod Brown, the idea of a digital dollar has appeared on numerous other occasions in the USA.

Transmission of Coronavirus through Banknotes

The researchers also examined whether the coronavirus outbreak is having an impact on the use of cash since there is unprecedented public concern about cash-based viral transmission.

Different countries have expressed their fears in contradictory ways. Cash circulation increased in the USA, while the volume of ATM withdrawals in the UK decreased. Some central banks have sterilized reams of paper money, while others have requested distributors to accept cash, or have requested the public to keep science above fear.

However, the research indicates that fear seems to be more widespread in economies with lower-denomination banknotes such as those of the USA, the UK, and Australia, among others. In these countries, there have been more Google searches related to the transmission through paper money in the last few weeks, than in those with higher-denomination banknotes.

By Alexander Salazar