The WHO quickly issued a most adamant and exasperated clarification^[1]: “WHO did NOT say banknotes would transmit COVID-19, nor have we issued any warnings or statements about this. We were asked if we thought banknotes could transmit COVID-19 and we said you should wash your hands after handling money, especially if handling or eating food.”

But the damage was done. Headlines like “Dirty banknotes may be spreading the coronavirus, WHO suggests”^[2] early in the pandemic helped contribute to a marked surge in digital payments, particularly contactless transactions.

On the road to a cashless society

LINK, the UK’s largest cash machine network, estimated that cash withdrawals were down 60% at the height of the lockdown at the end of April^[3].

More tellingly, 76% of people said they thought the coronavirus crisis would affect their future use of cash over the next six months, 44% said they will increase their use of contactless/mobile payments and 34% said they will do more shopping online.

The boost to the spending limit on contactless cards exemplifies how the move to digital payments could accelerate when it had to.

It took years of careful planning to increase the contactless payment limit from £10 in 2007 to £15 in 2010, £20 in 2012 and then £30 in 2015. It took only a few weeks of the pandemic to quickly up the limit to £45 in April 2020.

A cashless society has long been foretold as the natural endpoint for digitising financial services.

With more online shopping, more mobile banking apps, payment apps and virtual wallets, and the advent of open banking, we have been moving steadily in this direction.

It’s a change we can see happening fast in the UK, although it’s also happening at differing rates around the world.

The Bank for International Settlements found that contactless payments were rising before COVID-19 in countries as disparate as France, Russia and Indonesia^[4].

“We have never lived in a world that did not have physical money. Even before we had coins and paper money, we had shells, salt, sugar and commodities. We have never lived in a world where money is so widely an invisible thing.”

Arunav Das, HSBC

The unbanked and the digital divide

But this is not a change that is welcome to everyone. LINK’s April survey also found that 10% of people wanted to make payments in cash during the lockdown but found that it wasn’t accepted.

The issue was the subject of a moving story in The Guardian,^[5] about how refusing to accept cash can hurt the most vulnerable in our society.

According to 2019 figures from the UK Office of National Statistics, 4.6 million people in the country, around 7% of the population, lack internet access.

The most recent iteration of the Financial Inclusion Report in Britain also showed that 1.23 million adults remain unbanked^[6].

Arunav Das, Head of Proposition & Commercialisation at HSBC UK, says there may be a downward trajectory happening, but there’s still a lot of cash floating around the system.

“There will always be cash in society, it can never be 0%,” he says. “First, there is still a large unbanked population. In Europe and North America, around 80% of people have bank accounts. But in South America, for example, that is tracking at only about 58%.

“And the second factor is access to smartphones and digital infrastructure. Even those with bank accounts may not have access to digital methods of payment.”

Spending all your invisible money

Is a cashless, or nearly cashless society, a desirable outcome? Das raises the interesting topic of the psychology of spending.

There has been significant research into the idea that virtual money makes us spend more^[7][8], by removing the pain of “losing” the money as a barrier to spending, or causing us to lose track of our budgets and our spending.

This unintended consequence of digital payments is just one among many that a cashless society may have to deal with.

The law of unintended consequences

In 2019, according to UK Finance, the trade association for Britain’s financial services sector, the number of people living ‘an almost cashless life’ had doubled within two years to 7.4 million^[9].

Fewer than one in four payments were made with cash and more than half were made by card. With the pandemic pushing contactless payments and accelerating e-commerce, it’s likely that those numbers are now even higher.

There are times when digital solutions aren’t fixing the world, however, they’re answers in search of problems to solve. The move towards a cashless society needs to take everyone with it, not create further financial disparities.

We also need to carefully examine whether a cashless society is what we really need or want and what the unintended consequences might be.

For example, part of the unintended consequences of more digital payments is the rise of ATMs that charge for withdrawals. In 2019, the collective amount that people paid to withdraw their own money spiked to £104m, up from £75m in 2018^[10].

But the reason that there are more fee-operated cash machines is because people are making more contactless payments. This has led to cuts in interchange fees payments by banks for withdrawals, making free ATMs less viable. So it’s a vicious circle – more digital payments is making cash more expensive for those who can’t embrace digital.

When we look into a cashless future, we have to consider what wider consequences it could have. Could it play a role in the way that economies develop? How important is the psychology of touching and feeling our money?

“We have never lived in a world that did not have physical money,” Das points out. “Even before we had coins and paper money, we had shells, salt, sugar and commodities. We have never lived in a world where money is so widely an invisible thing.”

What FS marketers need to know

During a transitionary phase, it’s important for customers to feel reassured about the existing services they rely on. And it’s equally important to help them to get excited about the new services they can use right now.

• Be informative: Don’t forget that communication is about the transfer of knowledge and as services rapidly change, we risk leaving our audience behind. For example, while the contactless payment limit on cards is £45, there is no transaction limit for mobile wallet contactless payments with Apple, Google or Samsung Pay^[11]. However, to add to the confusion, individual shops may restrict these payments to the card limit, if they wish. In a complex situation that is in flux, your customers need quick access to simple, direct information on how to use new services.

• Be inclusive: As traditional banking firms invest in digital services and combat digital disruption from new market entrants, it’s tempting for them to reinvent themselves as digital-first. But your audience still includes those without internet access and those who are wary of embracing digital services. Make sure your messaging highlights all services, not just the shiny, tech-fuelled future.

Editions Financial takes a holistic approach that makes every message count. Your brand’s voice will be in every word, from educational content to simple instructions, from thought leadership to how-to guides.

^[1] https://www.marketwatch.com/story/who-we-did-not-say-that-cash-was-transmitting-coronavirus-2020-03-06

^[2] https://www.telegraph.co.uk/news/2020/03/02/exclusive-dirty-banknotes-may-spreading-coronavirus-world-health/

^[3] https://www.link.co.uk/about/news/coronavirus-cash-usage-data/

^[4] https://www.bis.org/publ/bisbull03.pdf

^[5] https://www.theguardian.com/money/2020/jun/24/you-cant-pay-cash-here-how-cashless-society-harms-most-vulnerable

^[6] https://www.gov.uk/government/publications/financial-inclusion-report-2018-to-2019

^[7] https://www.bbc.com/future/article/20191204-does-e-money-make-you-spend-more

^[8] https://www.huffingtonpost.co.uk/entry/why-using-a-contactless-card-might-be-costing-you-more-money_uk_5be86f6fe4b0769d24ce8d83?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAEkSuV6ITpOS_yHmu_8P1mpi4is-oydsM7bqBh7VYltIRXYHIz4bHv_j4Puxe_I-IMXtfGW8H2v7CpK3IsRm8fw2OC7Nka0HiEjI53YVBpKZ61muTnIwE51wRKk6PE16znJyKUI_3lYGoGQxjzRfGaLGQZrZ_TG2usktfLg-DigO

^[9] https://www.ukfinance.org.uk/press/press-releases/cards-used-half-payments-first-time-last-year

^[10] https://www.theguardian.com/money/2020/feb/07/quarter-uk-cash-machines-charging-fees

^[11] https://www.which.co.uk/news/2020/03/why-apple-pay-and-google-pay-are-the-safest-ways-to-spend/