Coronavirus Panic Over Cash Has Worrying Consequences

As European countries slowly start to look past the acute quarantine phase of the COVID-19 pandemic, attention is naturally turning towards what this “new normal” will look like. Austria, which has loosened some restrictions after Easter, has offered a first glimpse into some of the adjustments that will need to be made to allow Europe’s citizens to leave their homes and coexist with the virus until a vaccine or an effective treatment is available. Mandatory mask-wearing and widespread testing are likely to be essential, and smartphone apps identifying people who’ve been in close contact with coronavirus patients could further ease restrictions.

Each of these measures will need to undergo a rigorous cost-benefit analysis, weighing up scientific proof that they will slow the virus’s spread against the social disruption they will invariably cause. A perfect example of how some initiatives might do little to stave off the disease while having serious knock-on effects is the proposal to limit cash payments. A rapid shift to a cashless society could, without being backed up by scientific evidence indicating that cash is a vector for transmitting the coronavirus, isolate populations such as the elderly and leave financial systems vulnerable to cyberattacks.

Much ado about nothing? 

Unite, one of the largest trade unions in the UK, recently demanded that British transport companies abolish cash payments, arguing that the measure would reduce infection rates among bus drivers—though the move’s effects would be limited by the fact that cash payments are already rare on buses. Shops in Switzerland now have the option of taking advantage of a legal loophole which allows them to refuse to accept cash as long as this restriction is clearly displayed for customers to see.

While it’s true that some citizens have expressed concerns about the question of whether cash can spread the novel coronavirus—Internet searches on the topic have exploded worldwide, particularly in France—there’s very little scientific evidence that handling cash poses a particular risk. There have been various reports about the maximum time the virus might theoretically survive on various surfaces such as the paper or plastic which banknotes are made from, but it hasn’t been proven that cash is any more likely to make us sick than any other object we come in contact with.

As the Bank of England emphasized, “the risk posed by handling a polymer note is no greater than touching any other common surface, such as handrails, doorknobs, or credit cards”. In fact, cash could be a far more sanitary option than using a credit card at a chip-and-PIN terminal, which has likely been touched by hundreds of people since it was last cleaned. It’s not surprising, then, that European central banks have pushed back against some retailers’ reluctance to accept cash.

For some in Europe, cash is still king

The Banque de France recently sent out a letter reminding firms that cash is legal tender in France and that companies can be fined for refusing it. In the reasoning laid out in its letter, the French central bank highlighted one of the most important problems with prohibiting cash payments: “For the most vulnerable populations, cash is often the only payment method possible”.

On a concrete level, some 4 million French citizens receive benefits which are largely distributed in cash. But there is a broad array of reasons why, even though large parts of the population may enjoy the convenience of contactless and digital payments and financial institutions such as Visa and Mastercard are lobbying heavily for a transition towards a cashless society, some Europeans are likely to rely on cash for the foreseeable future.

A recent study in the UK, for example, showed that 12% of the population, including a staggering 80% of elderly citizens, would suffer from a cashless society. European pensioners’ associations have reported older people’s concerns that they struggle to remember PIN codes and worry about theft or scams associated with digital payments. Low-income communities, meanwhile, often prefer cash as it gives them greater control over their budgets and ensures that they don’t risk hefty overdraft fees. Inhabitants of rural areas often depend on physical banknotes for their daily needs—particularly when patchy broadband service makes it difficult for them to switch to digital payments.

Loyalty to cash payments varies widely throughout Europe—as much as 92% of transactions in Malta are still carried out in cash, while a mere 1% of Sweden’s GDP circulates in cash. It’s telling, however, that even in Stockholm policymakers are getting cold feet about shifting too rapidly away from banknotes. In November 2019, all but one political party in Sweden’s parliament approved a law mandating that all major banks offer cash services.

European central banks warn of security implications

This attempt to stem Sweden’s steady march towards digital-only payments not only cheered the rural residents’ groups which had championed the legislation, but likely relieved officials at the Riksbank, the country’s central bank. In a 2019 report, the Riksbank cautioned against going cashless, noting that such a scenario “will very likely lead to the general public no longer having access to state-issued money, Riksbank money, which is the most secure form of money existing”. While the report proposed the eventual introduction of a Riksbank-backed virtual currency to get around this issue, cash is currently the only currency with the imprimatur of a central bank—and banknotes remain the only legal tender in the eurozone.

Officials at other central banks in the EU have similarly advocated against jettisoning cash, highlighting problems ranging from energy blackouts which would put digital banking out of commission to targeted cyberattacks, to curbing the ECB’s efforts to ensure price stability.  As Petra Hielkema, director of payments at the Dutch Central Bank, summarised: “Cash provides trust”. With scientific evidence indicating that there’s no particular health risk from handling hard currency as long as normal hygiene procedures are followed, people’s recourse to this trusted source of funds shouldn’t be cut off.