The Post-Pandemic Payments Landscape

calendar iconJan 24, 2022


While cash use in retail payments has declined over the course of the pandemic, it saw a strong recovery as the most stringent lockdowns eased. It is likely to remain a key feature of economies worldwide in the longer term, according to an assessment by Cash & Payment News.

The December issue of CPN—which provides analysis and commentary on cash and the broader payments landscape—published details of a report drawing on data from America, Mexico, Spain and the UK, as well as EU-wide statistics, to conclude that there is presently insufficient evidence to suggest a structural shift towards a cashless world.

The authors of the paper—The Transformation in the use of Cash and Digital Payments during the COVID-19 Pandemic—note that payments have been in a constant state of change since the 1960s, with physical money coming to coexist with digital payment options while cheques have disappeared from many economies, and are declining rapidly in the rest.

Some countries, such as Iceland and Sweden, are particularly light users of cash. In others, including America and parts of Asia, cash and cashless options both play an important role in payments, while cash is dominant in much of Africa and Latin America. Overall, the payments landscape remains varied, however many have predicted ‘the death of cash’ from pandemic fallout. The authors looked at current trends in several economies to assess how realistic this is.

Beginning in Britain, they found ATM transactions have been decreasing steadily as retail digital transactions rise. Cash was used for 60 percent of consumer payments in 2009, dropping to 23 percent by 2019. While the lockdowns of 2020 increased the usage of cashless payment options, the authors ultimately said it was too soon to predict this shift would lead to an economy without cash, citing sharp rises in cash payments—between 50 and 80 percent—at the end of each lockdown.

Across Europe, a ‘cash paradox’ was noted, with decreased demand for cash as a payment option surpassed by a widespread desire to hold more physical money as security against economic uncertainty and for emergency use, should other options fail. The authors highlight a December 2020 survey commissioned by the European Central Bank (ECB) that reported 49 percent of respondents were using as much cash as before the pandemic. They further observe that, though research indicated cash did not present a serious risk of COVID-19 transmission, ‘large players in the payments sector such as Mastercard, VISA and some central banks… took advantage of the situation to promote the use of other means of payment’.

Spaniards show a marked preference for cash, with the authors citing a recent YouGov survey that found 53 percent would not support a cashless society, while 27 percent would, with the rest undecided. A December 2020 ECB report also found 83 percent of Spanish transactions are conducted in cash, compared with an average of 73 percent across Europe. This preference persists despite a nationwide decrease in ATMs and bank branches.

In Latin America, the authors observe cash continues to dominate retail payments, with higher unbanked populations and a greater percentage of informal work contributing to a stronger dependence on physical money. Consequently, they note, quarantines and the pandemic ‘have only slightly affected the payment behaviour of consumers and merchants’.

Mexico—as many countries—has seen a sharp rise in demand for high value notes as people turn to cash as a store of value. Alongside this, while the use of physical money in transactions saw some decline, it remained the most-used payment method as the pandemic unfolded. Its cash infrastructure also increased, with a growth in ATMs.

In America, cash usage has seen a decline—accounting for 19 percent of all payments, according to the May 2021 Diary of Consumer Payment Choice—while cash in circulation rose to an all-time high in 2021. The authors also note an ever-rising number of cities and states introducing legislation to ensure consumers have the right to pay cash, with an Act seeking to secure payment choice nationwide recently gaining support from both sides of the political aisle.

In the long-term—looking to a post-pandemic world—the authors are of the opinion that, while COVID-19 has accelerated certain payment trends, it is unlikely to result in the elimination of physical money. For small-value and spot payments, they say, cash ‘will continue to be superior to any other payment instrument’.

Last Updated: Jan 23, 2022