How the pandemic may change the future of currency

Could COVID-19 mean the end of cash?

Jun 01, 2020 | Editorial | Spending Habits | Budgeting | Government | Business
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Cash was once king in a crisis

As the most-used form of currency in the United States, accounting for 30% of transactions, cash has long been seen as a reliable way to keep money safe and liquid. During past financial downturns, such as the Great Recession, cash hoarding grew and continued to do so for years after the initial crisis.

This pandemic has been different: the LA Times called cash "the new Typhoid Mary" as the risk of COVID-19 infection via paper bills has prompted some businesses to shun its use. ATM usage has decreased significantly, as UK ATM network Link reports that 75% of surveyed respondents are using less cash now, with 54% actively avoiding it.

This decline in cash use, true to its pandemic roots, is a worldwide phenomenon: South Korean, Hungarian, and Polish banks have been literally quarantining banknotes to allow potential viruses to die, while some Iranian banks refused to accept cash from customers altogether due to the risk.

Is COVID-19 on our cash an actual threat?

Initial reports claimed the World Health Organization (WHO) suggested COVID-19 could survive on surfaces such as banknotes and bills, furthering the spread of the coronavirus. However, the WHO now denies that report, saying instead that the risk of virus transfer via cash is minimal.

Without an official virality statistic for paper bills, the closest comparison is data from the National Institutes of Health, whose tests show the virus can survive up to 24 hours on a cardboard surface.

Is perceived risk the main reason behind cash's decline?

A contributing factor may be the pandemic's effect on how much cash we're spending. Consumer spending was down 13.6% last month, while workers have started saving a much larger portion of their incomes, at an average of 33%. As people become more reluctant to spend, the usage of cash slows down too.

In an exception to previous economic crises, there's also a lack of places to physically spend bills and coins. Places cash would normally change hands — restaurants, bars, and other brick and mortars — have temporarily closed or will start operating at reduced capacity, further limiting cash use.

What does this mean for the future of cash?

Despite the pandemic, cash is a major component of our economy; it's still the most liquid form of currency available, and for the 14 million Americans who don't have access to a checking or savings account, it's also the only option. As the type of currency often relied upon by vulnerable populations, including the poor, elderly and homeless, a cashless society isn't ethically feasible, at least in the short term.

However, usage had been declining long before the pandemic: a UK study noted back in 2019 that the current rate of decline suggested cash use could end by 2026. Yet the same study settled upon a more realistic future than that extreme projection: in 15 years, cash could wind up representing only a minority of all transactions, as little as 10–15%.