ALEXANDRIA, Va.—As U.S. businesses reopen following the recent COVID-19 lockdown, it won’t be business as usual. For one thing, it’s unlikely that consumers will go back to using cash after their recent experience with contactless payment, reports Fortune.com.
The support for contactless payment comes from the widespread fear that using physical currency could be a way to pass the coronavirus from person to person. The World Health Organization stresses the importance of thorough hand washing after handling cash, and some banks have been using heat or ultraviolet light to sterilize money.
In February, the People’s Bank of China began to take banknotes out of circulation in Wuhan. Some were sterilized and others destroyed. In the U.S., the Federal Reserve has been holding U.S. dollars coming back from Europe and Asia in a “cash quarantine.”
Yes, the public perceives that physical money is dirty. But currency also is expensive to produce, distribute, count and store compared with digital payments. And it’s difficult for governments to track. The current economic crisis has made it clear that a centralized digital currency would enable governments to provide stimulus payments far faster and more accurately to struggling businesses and consumers than the current system of putting checks in the mail.
Last week, Euromoney published a detailed report on how the pandemic has encouraged discussion within the European Union about creating an integrated central bank digital currency. In the U.S., a coalition of finance experts, tech leaders and cryptocurrency developers advocate the design of a digital dollar. But China is expected to win the digital currency battle. According to the South China Morning Post, digital currency tests are set to begin this month in the four cities of Shenzhen, Suzhou, Chengdu and the Xiongnan zone near Beijing.
“Looking back years later, the two defining historic events of 2020 would be the coronavirus pandemic and China’s digital currency,” said Xu Yuan, a senior researcher with Peking University’s Digital Finance Research Centre.
Former U.S. Treasury Secretary Henry Paulson has dismissed fears Chinese fintech dominance will threaten the dollar’s status as the global currency, but he acknowledges that the uptake in digital payment services in China has been “phenomenal.”
The demise of cash will have enormous implications for businesses the world over—and will create equally outsized opportunities for designers who understand finance and technology.
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