The coronavirus pandemic introduced numerous changes into our daily lives. As impactful as social distancing, wearing masks and repeated hand washing were, they may not have the most significant long-lasting effect. The pandemic forced many people who normally used cash money to switch to digital payment methods – and this could be a lasting change.
As digital as today’s world may be, there are still many people who use cash regularly. Specific demographics, such as the elderly, are less likely to join the cashless society and many of them maintain the use of cash as their primary payment method. However, all of that changed during the COVID-19 pandemic and subsequent economic crisis. In Canada, for example, seniors over 65 started using non-cash payments twice as much1.
Billions of people around the world were in isolation, and as stores and restaurants closed down or switched to delivery-only, an adjustment in the payment ecosystem was needed. Moreover, physical currency that is transferred from hand to hand was also perceived as spreading germs. The World Health Organization even officially recommended minimising the use of paper money.
The consumer behaviour of using mobile payments systems was already on the rise, but now it became a necessity. In Sweden, for example, there were more cashless than cash transactions in 2019, positioning the Scandinavian country as a world leader in the category2.
Apps that require digital payment, such as those used for food and grocery delivery, became increasingly popular, forcing even those who use cash religiously to switch to a digital payment strategy. And, once the floodgates were open, these members of society who were strong-armed into going cashless, may never go back to it again.
Using smartphones as a payment method is not a very new idea. In recent years, an increasing number of smartphone and OS manufacturers have added mobile payment options to their devices, using contactless technology, such as Near-Field Communication (NFC).
Apple Pay and Google Pay are becoming more widely available, and people around the world are using their smartphones instead of cash or credit cards. During the pandemic, businesses became more open to such payment methods. In the US, popular supermarket chain Publix started accepting Apple Pay for the first time ever.
However, it is not necessary to even own a smartphone to become part of the cashless trend. Credit and debit cards have been in use for decades and in many places around the world, people only carry their cards, and have not felt the touch of paper money or metal coins in years. In the US, for example, 75% of the population have said that they would rather use a credit or debit card, rather than cash3.
On eToro, investors can gain exposure to a diversified portfolio, comprising mobile-based payment companies through the MobilePayments CopyPortfolio.
The Future of Money
Digital payments today exist in many forms. In China, the Tencent-owned WeChat app, which serves many purposes, has also become a prominent payment method. In fact, the use of WeChat as a payment method has become so popular, that tourists sometimes struggled to find businesses that accept other payment methods. In India, the government announced a partnership with MasterCard, as part of its “Cashless India” initiative, in the hope of making the world’s second most populated country completely cash-free.
Cryptocurrencies have long been hailed as the future of money, alongside mobile payment platforms. While the volume of cryptocurrency use is nowhere near that of fiat currencies, it still presents a new approach. If in the past, those in need of money transfer services or e-commerce sites had to have a bank account and credit card, now all they need is Internet access.
For investors who believe that crypto and digital payments will replace existing methods, eToro has created the FuturePayments CopyPortfolio. The portfolio offers exposure to companies spanning a variety of sectors, such as digital payments and blockchain.
The Changes Ahead
There are likely quite a few habits that will stick with us well after the coronavirus goes away. One of the possible changes may be the introduction of more work-from-home positions in organisations, and perhaps firms with entirely remote operation and no real estate at all. Another likely change would be the introduction of health scans, alongside security scans at airports.
And lastly, it could be argued that the COVID-19 pandemic was the proof-of-concept needed for a cashless economy. Today, entire societies are going nearly or completely cash-free – and this change may be here for good.
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