The worldwide coronavirus outbreak will likely speed up the adoption and transfer to digital cash in many countries around the globe, according to Deutsche Bank Research.
“The COVID-19 pandemic is accelerating the rise of central bank digital currencies as many governments see the handling of cash as a potential risk factor. This will likely add to calls to move towards digital cash according to our [Deutsche Bank research] colleague,” the institution tweeted on April 3, citing an article co-authored by Deutsche Bank’s macro strategist Marion Laboure.
Per the article, titled “The COVID-19 Cash Out,” countries worldwide now have a reason to reconsider the use of cash since the hand-to-hand exchange of physical currency could transmit the coronavirus.
The researchers noted that while China is currently one of the few countries that started disinfecting and even destroying banknotes en masse to hinder the spread of COVID-19, governments around the world “will be weighing the option” of following this example in the nearest future.
“A once-in-a-century pathogen would demand once-in-a-century solutions. An obvious place to start is to accelerate the inevitable shift toward digital payments,” the article said.
In fact, COVID-19 might become the catalyst that brings digital payments fully into the mainstream, the article argued, adding “Not surprisingly, the digital-payments industry is already focusing on the opportunities created by the crisis.”
Banknotes are forever
Yet cash still has a strong grip on people’s habits. For example, according to Deutsche Bank’s recent survey, one third-third of respondents in developed economies named cash their favorite payment method, with more than half of the survey-takers being confident that “cash will always be around.”
This notion further complicates potential transfer to digital cash, the researchers noted. As the Chinese authorities actively promote their online banking infrastructure and develop a central bank digital currency, Western countries are a few steps behind in this regard.
Moreover, there aren’t any large enough tech or financial companies in Europe, forcing the EU countries to use solutions developed in the US, such as Apple Pay, Google Pay, PayPal and others.
So for now, cash remains king. But it might not be for long.