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Could the Pandemic Drive Us to Cashless Payments?

A widespread move towards a contactless, cashless payments system raises some concerns about the impact on lower-income consumers, who do not have access to mobile payment capabilities or credit and debit cards.

by Steven Harras, CQ-Roll Call / April 29, 2020
In this photo illustration, an iPhone is used to make an Apple Pay purchase in London on July 14, 2015. (Peter Macdiarmid/Getty Images/TNS) TNS

(TNS) — The COVID-19 pandemic has fanned public concerns that the coronavirus could be transmitted by handling cash, according to a recent report by the Switzerland-based Bank of International Settlements, prompting merchants and members of Congress to contemplate more sanitary, hands-off digital payment systems.

Although the BIS report says the scientific evidence suggests the probability of coronavirus transmission through banknotes and coins is low compared with other frequently touched objects, consumer anxiety about physical forms of currency could speed up the trend towards cashless, touchless payments.

The pandemic has already led one of Congress’ most prominent proponents of innovative financial technology to introduce legislation that would reduce the physical contact a consumer must make with payment terminals and related objects when making an in-store purchase.

Rep. French Hill, R-Ark., a member of the House Financial Services Committee’s Task Force on Financial Technology, last month proposed legislation that would establish that any swipe, dip or tap transaction at a merchant point-of-sale terminal wouldn’t trigger a signature requirement.

Republicans on the Financial Services Committee said in a memo when the legislation was introduced March 12 that innovation in credit and debit transaction verification means that signatures for such transactions are no longer necessary, and “eliminating the practice can cut down on the spread of the virus.”

“The purpose of my legislation is to lessen the amount of direct person-to-person contact that happens during point-of-sale transactions to help mitigate the spread of COVID-19,” Hill told CQ Roll Call last week. He said he hopes the bill “will not only help the short-term effects of the pandemic, but can also have longer-term impacts by bringing awareness and potential modernization to our current payment infrastructure.”

Hill’s legislation has the support of the Financial Services Committee’s top Republican, Rep. Patrick T. McHenry of North Carolina.

“We can’t take on a new threat with old tactics,” McHenry said in a written statement when the bill was introduced. “We need to take a 21st century approach to combating the impacts of a public health crisis in our modern world.”

The BIS report notes that because the novel coronavirus survives best on nonporous materials, such as plastic or stainless steel, “debit or credit card terminals or PIN pads could transmit the virus too.”

The Electronic Transactions Association, an advocate for public policies that foster financial technology, points out that experts believe the coronavirus can remain viable as many as five days on plastic and four days on paper, which raises issues about the use of credit cards, terminals, cash and receipts.

Public curiosity and concerns about the role of paper money have manifested in online activity. The number of Internet searches referencing both “cash” and “virus” is at record highs, according to the BIS report.

The United States, along with Australia, France, Singapore, Switzerland, Ireland, the United Kingdom, Canada, Jamaica and Kenya have had the highest recent search interest.

Some nations have taken steps to reduce the amount of physical contact consumers must make at the point of sale. Financial authorities, banks and card networks in Austria, Germany, Hungary, Ireland, the Netherlands, the United Kingdom and elsewhere are making more transactions eligible for contactless payments, according to BIS researchers. Contactless card payments, which have been rising sharply in European and Asian countries over the past few years, don’t require entering a PIN for small transactions.

In the United States, the payments industry has spotted an “accelerated shift away from cash” and a “trend towards contactless payments,” ETA CEO Jodie Kelley told CQ Roll Call.

She pointed to a survey by the association that found 27% of small businesses that accept contactless payments — meaning payments by mobile phone apps such as Apple Pay or contactless debit or credit cards — saw increases in their use after the start of the COVID-19 pandemic. The survey of merchants was conducted between March 27 and March 30.

A widespread move towards a contactless, cashless payments system raises some concerns, however, about the impact on lower-income consumers, often members of minority groups who do not have access to mobile payment capabilities or credit and debit cards.

“A realistic assessment of the risks of transmission through cash is particularly important because there could be distributional consequences of any move away from cash,” the BIS reports cautions. “If cash is not generally accepted as a means of payment, this could open a ‘payments divide’ between those with access to digital payments and those without. This in turn could have an especially severe impact on unbanked and older consumers.”

Kelley acknowledged the concerns, noting that there are 55 million unbanked or underbanked consumers in the U.S. But she said the payments technology industry is committed to bringing digital payments and other financial services to underserved consumers, citing efforts by companies such as Amazon and PayPal.

She said the move toward contactless payments will outlive the current health crisis and become a permanent fixture in the payments ecosystem. “As consumers increasingly use contactless forms of payment, we think they’ll find the user experience to be positive, and we’ll see contactless take off in this country,” she said.

©2020 CQ-Roll Call, Inc., Distributed by Tribune Content Agency, LLC.

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