After eight months of various lockdown measures, people have got used to a more remote and digital way of life. This has further put pressure on the existing cash-based consumer society.
Lockdowns, temporary business closures, people not leaving their homes, buying groceries and shopping online rather than in-store, all while having to still deal with the day-to-day problems of maintaining a house – these aspects have pushed people into using online banking and payment methods a lot more because, quite simply, you can’t use cash that much in these times.
There is also the public health and safety aspect of touching a bill that has circulated through several hands. This is one reason why contactless payments have soared in the West, a region that has been credit and debit card-friendly for over 40 years. People who were using various digital banking and payment methods before Covid-19 have kept using them as often, if not even more, during lockdowns. They had no ‘consumer conversion journey’ to do.
However, the biggest bump in users has been from people who were either too reluctant, comfortable, old, or too used to paying by cash. As these new users have joined the fray of being cashless and have been effectively forced to use a much more convenient and easy method of paying (i.e. opening a Revolut, Monzo, or Monese account; downloading a personal financial management savings tool to help weather a furlough; or ordering delivery at home more often), they will most likely keep using these services even after Covid-19 has passed.
Currently, 92% of circulated money in the world is already digital. However, we still do not have a society that has fully embraced a digital-only payments infrastructure. This phenomenon will happen gradually until cash is seen as the exception rather than the rule.
In the very unlikely event where a country essentially bans paper currency overnight and keeps it for use only for intra-bank and intra-government fund guarantees, a lot of people would lose access to the economy and maybe lose parts of their savings.
The change is happening slowly and is mostly a positive one. It is much easier and convenient to participate in the economic life of a society when all payments are instant and you can buy pretty much anything online. This leads to more economic participation, which leads to more sales, which leads to more business, money, and tax revenue being generated.
In the end, cash will not be necessarily pushed out of use, but rather people will keep moving away from it in favor of better and more convenient transaction methods. Covid-19 has only made this process faster.