Paper money is transferred from hand to hand multiple times every day. It is a norm to pay for items with cash – something no one has even second-guessed. The COVID-19 crisis, however, has led to unprecedented public concerns about viral transmission via cash. With the global economy being on track for its sharpest, and by far quickest, slowdown since the Great Depression almost 100 years ago, this call for a cashless society is a daunting one.
When the World Health Organization released a statement recommending that people turn to cashless transactions to fight the spread of Covid-19, several governments and retailers across the world took action.
In China, thousands of banknotes were destroyed or disinfected to eliminate the spread of the virus. South Korea followed suit, and in the US, the Federal Reserve has started storing banknotes that have come in from Asia before recirculating them back into the economy.
Others have taken a more peculiar route. Rumours continue that some Canadians have been putting banknotes into washing machines to rid them of the virus, taking advantage of the fact that their ‘paper’ money is made of plastic. This puts a new spin to money laundering, and yes, pun intended.
As drastic and creative as some of these methods may seem, it remains a matter of fact that this pandemic is driving the adoption of contactless payments in a major way. France is even moving ahead with trials for a digital euro. It is unlikely that it will end the use of cash everywhere, but it may be enough to push many markets towards a new cashless paradigm.
Digital payments seem to be the clear winner coming out of this crisis. Once born out of convenience, contactless digital payments are now a necessity for many in such a time. Luckily, we live in a time where much of the infrastructure required to complete an online purchase is already in place. This may not have been possible even 10 years ago.
With governments urging citizens to stay at home (and in some cases making it illegal to leave), there has been an explosion in the use of online shopping and delivery systems. Businesses like PayPal, Amazon, and Instacart have seen huge spikes in demand.
In addition to this, even if one were to physically visit a store, COVID-19 has given people enough reason to be wary of public pay terminals. Digital wallets like Apple Pay and Google Pay allow a payment to be made without even touching a card to a terminal or entering a PIN. As a result, cash managers and payments experts agree that the number of digital transactions, compared to physical cash transactions, will soar as more and more countries go into lockdown.
There are some benefits to this new digital model of payment. Some argue that it will boost financial inclusion, as more individuals are able to open bank accounts online and transact digitally without ever having to enter a physical bank branch. Another benefit is that digital payments are a lot cheaper to process than their cash equivalent, as some countries, such as India, spend quite a bit on printing, storing, and distributing cash.
Even with these benefits in mind, the question of if companies will be able to cope with the increase in online scammers and hackers that comes along with it is an intimidating one.
It is a sad truth, but any crisis presents opportunities for criminals and, with the radical change occurring at a high speed during this pandemic, new loopholes are opening for online scammers and hackers. COVID-19 is a backdoor of sorts for fraud to flourish, with common scams including impersonating public health authorities or other government organizations and demanding payment from the targets.
In response, companies and financial institutions need to make significant investments to improve fraud prevention and detection. Artificial intelligence and machine learning can both make a significant difference in this area, such as with software company Kount’s AI-driven online fraud prevention, businesses can prevent emerging fraud, accept more good orders, reduce manual reviews, and control business outcomes.
COVID-19 has sent the global economy into a tailspin, with the call for cashless payment methods being one of many new changes to society. While a post-pandemic world may be more digitally-inclined, it is difficult to say that physical money will be done away with altogether. In the current circumstances, however, the trade of cash is a propellant for the virus so try to avoid it for now.