Has the COVID Pandemic Killed Cash?

Many of life's transactions went contactless and cashless during the coronavirus pandemic. To receive goods and conduct business during lockdown, digital payments were a necessity for American consumers and retailers. Post-lockdown, as the pandemic continued, many consumers developed new buying habits and moved further away from cash payments.

There is no doubt that the United States is moving closer to a cashless society, but will cash ever be gone for good – and is that good?

As news of the COVID-19 pandemic unfolded and cities across the country and the world began periods of lockdown, consumers started consuming without leaving home – and payment methods shifted away from the use of cash.

While cash circulation increased in the U.S. and other countries during the pandemic, it was mainly due to people taking withdrawals from their banks to stockpile cash, according to The Economist. The amount of cash in the GDP has been steadily rising, and the pandemic only stimulated more cash savings. It's clear Americans still see cash as a store of value. But cash usage dropped significantly during that same time, and Fintech's safe, no-contact payment methods surged.

Grocery trips and eating out morphed into mobile shopping, electronic payment and delivery or curbside pickup. Online retailers saw a surge, too. Amazon's profits increased 67 percent between 2019 and 2021, reaching almost ​$470 billion​, and total Ecommerce jumped ​32.4 percent​ in 2020 and another ​12.4 percent​ in 2021.

ATM usage declined, as did the number of transactions involving in-person contactless card use. The Federal Reserve reported an unprecedented ​13 percent decline​ in the total number of in-person credit cards in 2020, while remote card payments grew ​24 percent.​ Digital payments company, Square reported a ​300 percent increase​ in retailers accepting digital payments in the first month of the pandemic alone.

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People grew more comfortable with mobile payments, and the number of person-to-person bank account transfers through apps like Venmo, Zelle and PayPal escalated. PayPal processed ​$936 billion​ in payments in 2020 alone, up ​31 percent​ from 2019. Digital wallet payments through apps like Apple Pay and Google Pay were also on the rise.

As consumers developed their cashless habits, many businesses reimagined their operations. Dozens of entertainment and sports venues opened up as fully cashless. That's good for getting venues open again, but is it good for the long haul?

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Banks and retailers have been pushing debit cards and credit cards on consumers for nearly half a decade. These electronic payments have their benefits, including convenience and ease of tracking, which have increased their popularity over time.

Expanding on its detailed 2018 payments study, the Fed reported that the number of non-cash payments continued to rise with a marked surge in ACH payments.

The idea of going cashless raises social justice concerns. What is convenient for many may be financially exclusionary - and even discriminatory - for economically vulnerable people.

While some researchers and economists make forecasts about a cashless society, other analysts have an eye on the ​18 percent​ of unbanked or underbanked American adults who stand to lose out.

A pre-pandemic 2019 FDIC analysis found 5.4 percent of U.S. households were without a checking or savings account. Among the unbanked, ​29 percent​ reported they didn't have enough money to meet a financial institution's minimum balance requirement. Nearly ​5 percent​ of households surveyed reported using nonbank credit, such as payday loans, pawn shops or title loans.

The idea of going cashless raises social justice concerns. What is convenient for many may be financially exclusionary – and even discriminatory – for economically vulnerable people.

Some states recognize the concerns of going totally cash-free and have enacted laws that require businesses to continue accepting cash. New York, Massachusetts, Philadelphia, San Francisco and New Jersey are among the states leading the way. But this idea hasn't gone unopposed by those who feel businesses should be able to decide on their own.

Those in favor of a cashless society look to Sweden as a model. Some Swedes have even adopted the use of implanted microchips to carry their digital wallet and other personal information. But Sweden also has universal healthcare, an advanced welfare system, and ​1.8 million​ people at risk of poverty. The United States has ​37 million people​ at the poverty level, according to 2020 census data.).

As the transactional world moves increasingly digital, there's much more to think about than contactless convenience alone.

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