FinTech

Can COVID-19 Influences Dethronement of Cash?

covid 19

Rarzack Olaegbe

Mr Chukwuemeka Anyansi is a former banker. Without a job, COVID-19 had pushed him to his wit’s end and he did not know what to do. On the verge of giving up, he opted to slap the Lagos roads with his salon car. Then he received a credit alert of N425, 000 loan from the Central Bank of Nigeria [CBN]. The N50 billion loan from the apex bank is the COVID-19 targeted Credit Facility for SMEs and households. The loan is for small businesses that were affected by the coronavirus so that they can stay in business.

Anyansi got a total of N425, 000 after administrative cost. This is how he spent the loan. His wife got N250, 000 to augment her business. His sister received N50, 000 to boost her micro trade. He invested N100, 000 in a mutual fund. He bought foodstuffs worth N25, 000. He did not handle physical cash. He deliberately made electronic payment transfers to all the recipients. Did he do this out of convenience and safety to avoid spreading COVID-19? What informed his actions of avoiding cash?

Here is a clue. The World Health Organisation [WHO] released a statement at the outset of the pandemic. WHO recommended that people should turn to cashless transactions to fight the spread of COVID-19. This statement has resulted in a number of governments and retailers across the world taking action. It has led to the realignments of how consumers make payments; not necessarily out of convenience but out of necessity.

Besides, health practitioners have equally warned that banknotes can contain bacteria that lead to the spread of viruses. In most cases, paper money is designed to last up to 15 years. This longevity gives cash enough time to accumulate germs. Since the virus does not spread by penetrating the skin of your hand, it is transferred from hand to other parts of the body such as your nose, mouth and the eyes. Therefore, cashless and contactless payments are recommended during this coronavirus crisis.

Media reports have also stated that China had recently disinfected or destroyed thousands of banknotes to eliminate the spread of the virus. South Korea did the same. In the USA, the Federal Reserve stored banknotes that came from Asia prior to recirculating into the economy. To join the fray, many retailers had banned the use of cash in their stores to keep employees and customers safe; opting for contactless payments instead. That is one of the reasons online shopping has become the safest option during this pandemic.

Now, it appears that the crisis has accelerated the transition towards cashless transactions in the emerging markets, as online payments and e-commerce are getting bigger. Can the coronavirus pandemic influence the dethronement of cash as king? Can cash be dethroned? Can we experience the end of cash? In The End of Money written by David Wolman, the book focused on counterfeits and the cashless society. To experience life without handling physical cash, Wolman had to perform an experiment by deciding to shun cash for 12 months, prior to writing the book. He ventured forth to find people and technologies to help him navigate the road ahead. In one breath, he acknowledged the usefulness of physical money.

In another breath, however, intrigued by the distinct possibility that cash will soon disappear, Wolman set out to investigate the future of money and how it will affect your wallet. The question this column is seeking answers to is this: Can the coronavirus pandemic lead to the dethronement of King Cash and force the world to use electronic payment wholesale? Nobody knows.  But we can get an inkling of what to expect while the coronavirus lasts.

According to Juliet Anammah, chairwoman of online marketplace Jumia Nigeria, who told Oxford Business Group that the company had to adapt from a platform where consumers can buy whatever they want to a platform that primarily makes sure consumers can access basic essentials, such as food, sanitary items and personal hygiene products.  In response to rising online demand, e-commerce platforms were also compelled to improve or expand their delivery and payment services.

Anammah explained that the COVID-19 pandemic will encourage more people to move away from cash transactions to the extent that they have a choice. She mentioned that many of Jumia’s customers in Nigeria do not want to use cash if possible. “This choice is based on multiple factors such as access to devices with digital payments and the cost of the transaction and payment solution. It is important to breakdown all these elements to make sure the cost of digital transactions is sufficiently low to encourage more people to go digital.”

As it is, the pandemic is not pushing consumers to the digital payment platforms only in Nigeria. Statistics from the Nigeria Inter-Bank Settlement Systems [NIBSS] showed that the value of electronic payment transactions through the point of sales terminals, instant transfer and electronic fund transfer had increased significantly by 82 per cent to N11, 676 trillion in May 2020. The figure was N6.421 trillion in April 2020.

Research further showed that it is a recurring occurrence in most countries. In Indonesia, according to the Central Bank of Indonesia [Bank of Indonesia] digital transactions have increased by 102.5% year-on-year from January to April of 2020. In the UAE, figures from Ken Research found that online grocery orders had increased by 80-100% in the first few months of the year, owing to the virus. In Saudi Arabia, some online retailers had experienced a 200% increase in average sales in the early stages of the pandemic.

In Kenya, one of the leaders in digital payments in Africa, the government has advised people to use online or mobile methods rather than cash as a precaution against the virus. The pandemic has accelerated the uptake of alternative payment methods and helped to stabilize the usage of these methods of payment.

Influenced by the pandemic, Anyansi and company are in favour of electronic funds transfer. Why not? It is easy. It is fast. It is convenient. It is safe. It can be traced. With 42 million bank accounts in Nigeria linked to the Bank Verification Number [BVN], fraudsters have no hiding place. But with cash, spurious transactions still roam free. The end of cash is not here. But from what is playing out across the globe and aided by the coronavirus, electronic payment is on steroid. Would Anyansi and everyone who detest visiting the banking hall want King Cash dethroned?