Economy

Corona crisis: contactless payments sometimes replace cash permanently

At the checkout, the Germans’ payment behavior changes due to the Corona crisis.

Robert Hoetink / Getty Images

The demand for cash was only brief at the beginning of the crisis, but it increased significantly.

This is shown by a study by Deutsche Bank, which deals with payments by Germans in the corona crisis.

Some of the cash payments are likely to be permanently replaced by contactless payment methods due to the crisis, the study authors write.

Does the risk of getting infected with the corona virus increase if you pay with cash in the supermarket? One might come to this conclusion if one looks at an investigation of the “Dirty Money Project” from 2014. Researchers at the time had examined banknotes worldwide and came to the conclusion that up to 3,000 types of bacteria can be on a single bill.

In the case of the corona virus, however, virologists see droplet infection as the most important route of transmission. Banks and supermarkets still advertise that customers should pay contactless because it is the more hygienic method. At the same time, some banks had increased card payment fees during the crisis.

Cash demand increases significantly at the beginning of the crisis, but only briefly

Against this background, it is interesting to see how consumers have behaved recently. In an analysis, Deutsche Bank wrote that cash was in great demand across Europe at the beginning of the corona crisis. The euro circulation in March jumped by 36 billion euros compared to the previous month.

Interesting: Almost half of the money was small notes with which daily purchases are paid. However, some of the money was not withdrawn by consumers. It served as security for the banks because they could not estimate how much cash the Germans would stock up on. For comparison: In the financial crisis, the demand for cash also increased, but rather for larger notes that savers viewed as a “safe haven”.

In the corona crisis, the actual demand for cash increased only briefly: in the first week of the shutdown by about half, then only slightly in the second week of the contact closures. A bank run, in which consumers stock up heavily with cash, failed to materialize.

According to Deutsche Bank, the reason was “that general trust in a functioning infrastructure, including cash supply and other financial services, quickly regained.”

Contactless card payments could permanently replace some of the cash payments

Nevertheless: According to the study authors, the advice to pay contactless should have contributed to the fact that contactless card payments permanently replaced part of the cash payments. However, an accurate forecast is difficult. Only with normal consumer behavior after the pandemic will a precise picture of the new payment mix emerge.

However, simple, contactless payments had become increasingly important last year. The pandemic is an incentive for numerous customers to try this payment method. The study authors are therefore certain: “The long-term trend towards non-cash payments has received a strong boost from the desire for protection against infections and the demands of the trade.”

Nevertheless, people with a keen interest in cash will continue to uphold the advantages of notes and coins. Privacy, ease of use, a better overview of spending will continue to be important to cash users. And despite the increasing number of cashless payments in retail, the higher demand for cash at the beginning of the crisis indicates that Germans still see it as “safe money”.

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