International Forecaster Weekly

AS THE NATION REOPENS, SO GOES CASH? Will Covid-19 Hasten Our Move to Digital Payments?

To some, however, a pandemic-triggered decline in cash is nothing to celebrate. Cash is an essential financial tool of the millions of Americans who either don't have access to banks or credit cards, or who opt to not make use of them. 

Guest Writer | May 6, 2020

By Dave Allen for Discount Gold & Silver
The retail apocalypse is coming. Stores have been closing their doors all over the country. And whether they're inside a mall or on a standalone slab, many of those that are still open are saying no to cash. 
Shoppers continue to switch their buying to Amazon and Walmart.com. Most of the restaurants that have stayed open won't take cash, and they're operating without any customer contact at all, requiring them to pay online before picking up their orders.
What once seemed like the oldest, most reliable - and preferable - way of paying seems in peril. 
Harvard economist Kenneth Rogoff, who has advocated for a less-cash society (as opposed to cash-less),predicts the crisis "is absolutely going to drive people to prefer credit and debit to cash." The jury is out on what Rogoff expects , but.....
DIGITAL PAYMENTS FILLING THE VOID
Digital payments, which are quick, clean and easy, are filling the void. That sudden shift is a huge opportunity for tech firms such as online payments giant PayPal, which also owns Venmo. 
CEO Dan Schulman says the company is seeing the number of new customers setting up accounts each day "basically double" from levels before the pandemic. 
Square, the digital payment company run by Twitter CEO Jack Dorsey, has found itself fielding calls from merchants whose customers no longer want to touch any surfaces.
How much of this scenario is temporary or represents a fundamental change remains to be seen.
Tech companies have been pushing toward a more virtual, less cash-based payments system for a long time and, more recently, have started pressuring regulators to free them from the restrictions that govern traditional banks. 
And that's worrying those who look out for older and poorer Americans-groups that tend to be more reliant on paper money either for lack of access to computers and smartphones or because they don't do business with banks.
Among cash's greatest strengths is it universality and difficulty to track. Those attributes give Americans a nearly anonymous way to with their money privately as they please.
We can donate to our favorite church, political candidate or, as suggested by Nancy Scola, back a dissident group. 
Jim Harper, a visiting fellow with the American Enterprise Institute, hits it on the head when he says, "Some of us still use cash because we think it's nobody's business." 
Scola reminds us that since the founding of our republic, cash has been at the heart of the American economy - even when it was tied to gold. 
She asks, "How close could coronavirus come to killing off cash-and if it does, is society ready?"
ATMs RULE
It took decades - some might say a few centuries - for ATMs to reduce most visits to bank tellers. Today, Americans withdraw cash from them 5 billion times each year.
By one measure, cash is far from history. Federal Reserve data show a slight uptick in U.S. currency withdrawals globally, although much of that could be investing in what many people still see as a safe currency.
The pandemic, though, has forced Americans to change their spending habits virtually overnight.
For example, after resisting the move for years, the 1,200-store grocery chain Publix this month started accepting Apple Pay. 
And the Treasury Department made it clear last month that Americans will get their coronavirus relief money a lot faster if they forego a paper check and instead opt for direct deposit. 
The Department of Agriculture is rushing to expand a pilot program that lets the country's 42 million SNAP recipients buy what they need from online grocers like Amazon Fresh.
Advocates for moving away from cash point out that it's much faster to send money via the internet than to send a check through the mail.
Last month, Square's Dorsey prodded the government to let his company and others in the fintech industry help figure out how to get Americans their money in a hurry. 
Schulman, of PayPal, says he pitched a business acquaintance, Treasury Secretary Steven Mnuchin, about distributing government funds via PayPal. 
And, lo and behold, the Treasury Department approved both PayPal and Square as distributors of the $350 billion in small-business loans that were also part of the stimulus package.
WHAT ABOUT THOSE WITHOUT ACCESS TO BANK?
To some, however, a pandemic-triggered decline in cash is nothing to celebrate. Cash is an essential financial tool of the millions of Americans who either don't have access to banks or credit cards, or who opt to not make use of them. 
Last year, San Francisco passed a ban on cashless stores - one reason Standard Cognition's contactless demo store still takes dollars.
One unlikely place to look to better understand the tensions caused by the move away from cash - the D.C. salad chain Sweetgreen. 
In 2016, the fast-casual food retailer stopped accepting cash. There was immediate fall out. The company, critics argued, was blocking cash-preferring patrons from getting access to healthy foods. The company rolled back the ban two years later. 
But the company designs at least some of its stores to highlight the most efficient way to get your hands on a Caesar salad -
First, pay for your order online, drive, walk or bicycle to the store, pick up your meal from a designated shelf, and be back out the door in less than a minute. This still leaves cash-payers a step behind - skipping cash lets you skip the checkout line.
That's the kind of hybrid that Schulman believes is what's likely to stick after pandemic has been brought under control; i.e., we'll go back to shopping out in physical stores - but stop paying in cash, instead paying online.
Already, we Americans are adapting our behaviors. PayPal reports that in the first week of March, payments tagged with its medical mask emoji - often to out-of-work housekeepers, babysitters, and hairdressers - grew by 375%.
Of course, Scola says there's another possibility - cash comes roaring back after the coronavirus, perhaps something like the handshake, but that we "return to out of habit" or because "it still has its place."