Should People Stop Using Cash in a Post-COVID-19 World?
We know you're doing everything you can to keep your family safe—so should you stop using cash? How big is your risk?
In the wake of a global pandemic, heath and safety are naturally on the forefront of everyone’s mind. People are keeping their distance, postponing gatherings, and avoiding high-touch areas. The COVID-19 pandemic has and will continue to change our daily habits beyond the curve of the virus. So what does this mean for the world of physical currency? Is cash officially off the table?
It depends on who you ask. While cash is the end-all for some, others haven’t used cash in years. Many Americans are working from home, shopping online from home, and leaving their cash at home altogether. With technology like digital platforms, banking apps, mobile wallets, and contactless payment options, many have used the pandemic as a reason to stop using cash entirely.
But does cash actually pose a large risk to consumers? The answer is complicated.
How much did we use cash pre-COVID-19?
In the years leading up to 2020, America had already begun experiencing a decrease in the frequency of cash purchases. Technology, cards, and digital payments had rapidly changed the consumer landscape. A study conducted by the Federal Reserve Bank of San Francisco stated that in 2018, consumers used cash in only 26 percent of transactions, which was down almost 30 percent from 2017. The United Kingdom experienced a similar move away from cash, with 51 percent of transactions taken by card and only 23 percent taken by cash, down from 58 percent a decade ago, according to Matt Lewis, a chartered financial planner at EQ Investors.
Pre-pandemic, many Americans already found cash to be inconvenient. With the stay-at-home orders and stores shuttering, online shopping became the only reliable method of transaction.
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The movement away from cash
Cash fell out of favor for many Americans for a multitude of reasons. Using a credit card or their phone seemed easier than bringing enough cash or holding on to bothersome change. The classic “emergency twenty” may have not left their wallet or purse in years.
Businesses also began to move away from cash because of its benefits for them. Cards and mobile wallets offered increased security, tracking potential, and safety through less cash on the premises.
Experts note that the pandemic exacerbated already existing declines in cash transactions. “Merchants and consumers [have] reconsidered their behaviors,” says Arnold Goldberg, SVP, senior technologist and chief product architect at PayPal. “Not having contact with customers and shutting down retail establishments completely created a catalyst for change.”
On the other end of the spectrum, many experts feel the consumer trends away from cash pre-pandemic and the spending/behavioral changes post-pandemic can’t easily be separated. Some went as far as to say the worldwide pandemic may not be the death sentence to cash that consumers imagined.
“COVID-19 may have accelerated the adoption of contactless and digital payments for small business, but the population at large will revert back to old behaviors,” writes Aswin Pranam, instructor of digital innovation at Brandeis University and Continuing Studies at Stanford. “Unless there is a scientific consensus that physical bills effectively transmit the virus, most people will ignore the risk associated with using plain bills.”
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How safe is cash right now?
“Cash has long been studied for its potential to carry germs including virus and bacteria,” says Dr. Teresa Bartlett, Managing Director and Senior Medical Officer at Sedgwick. A study published in 2017 on one dollar bills circulating in New York City, “demonstrated there are hundreds of microorganisms like E. Coli, Staphylococcus, Salmonella, MRSA…94 percent of paper currency has such infectious pathogens on it.”
While no major health organizations have come out against the use of cash, many are insistent on its risks. The CDC, World Health Organization (WHO), and other epidemiological organizations suggest washing your hands after touching or exchanging cash. This is the same advice for contact with any high-touch surfaces or objects. So why is the dollar such a point of concern?
rd.com, Getty ImagesLikely because cash changes hands over a hundred times each year (and potentially multiple times each day). Additionally, cash is very difficult to properly clean or sanitize, unlike the plastic of credit cards or glass of phone screens. In fact, United States currency is 75 percent cotton and 25 percent linen. Past studies on similar materials show there is a high potential for cash to hold the virus for anywhere from a few hours to a few days (even over a week by some accounts).
While experts disagree somewhat on the specific level of risk, they all agree that cash could potentially spread COVID-19. As always, the best way to reduce the risk of contracting any virus is through proper sanitation and handwashing.
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Should we expect to phase out cash entirely?
While cash may no longer be king, America is not ready to dethrone it just yet. Cash is still used by much of the population for small transactions or budgeting purposes. Small, rural, or specialized businesses such as flea/farmers markets, barbershops, laundromats, bars, and others rely on cash-based business models.
Those with smaller budgets as well as those over the age of 65 still use cash proportionately more often. This leaves a sizable portion of the population with fewer options. Some cities tried to combat this with ordinances requiring businesses to accept cash (such as San Francisco and Philadelphia). Liam Hunt, financial writer and market analyst at SophiscatedInvestor.com, notes that the cashless society is inequitable to many already underserved: “The adoption of cashless purchasing is a matter of fairness and equality of access…a question of economic justice.”
Who is left out in a cashless society?
With as high as 6.5 percent of Americans without bank-issued debit or credit cards, the underbanked population is one barrier to a fully cashless society. Cash is used more frequently by those who are economically disadvantaged or without access to technology or the Internet.
A 2017 Federal Reserve survey found as many as 50 million households in the United States were underbanked or unbanked. Many more households are without consistent access to a mobile phone or Internet connectivity. “We tend to demonize cash in fear-based situations while overlooking a sizeable portion of the population reliant on it—without directly addressing the needs of the underbanked, we can’t smoothly go cashless, even right now,” Shane Dutka, founder and general manager of Review Home Warranties, notes.
A cashless society could disproportionally harm certain demographics. “Those who live in areas with poor Internet or phone connectivity could struggle to make basic payments,” according to Anna Barker, personal finance expert and founder of LogicalDollar. “Those with physical or mental health problems or the elderly who struggle to use technology could be left behind.”
The switch digital or online payment platforms (such as PayPal, Venmo, Cash App, Apple Pay, Google Wallet, Zelle, Square, Stripe, etc.) might also create difficulties for older customers. To combat distrust and concerns, many platforms offer enhanced security protections, instructional videos, and transaction insurance.
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The big question: Should you stop using cash?
The short answer is no, not necessarily. The longer answer is while cash does offer a risk of transmission, it is not necessarily more dangerous than any other medium. The World Health Organization, despite some false claims to the contrary, has not advised against the use of cash. Neither has the CDC or any other major health organization. The advice remains to wash and sanitize your hands after exchanging or touching cash.
Still, if you’re concerned about using cash in the wake of a pandemic, there are other options. Contactless payments, credit and debit cards, and digital wallets are providing new and safe payment methods. Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business, promotes online markets as they are inherently scalable. These online markets are able to handle the predicted influx of new users and businesses easily. Also, increasing accessibility by adding hundreds of new companies each day and extending access to less metropolitan areas.
“We’re not predicting that cash will go away entirely in the foreseeable future,” says Angela Conti, head of consumer payments at TD Bank. “We’re not combatting a move away from cash, but rather we are focused on providing customers with safe, secure, and convenient payment options to fulfill their needs.”
While most health and finance experts agree that cash isn’t going anywhere, they disagree about what the future may bring. Cash may have once been king, but digital finance and payment technology are definitely giving it a run for its money.