Bank of International Statements (BIS) recently released a research report on the effect of the COVID-19 pandemic to the overall payment system. According to the research, the virus is causing fear and uncertainty as physical cash sees a dip in usage in favor of digital payments. Additionally, the report from BIS states there may be an acceleration in the development of government-backed digital currencies such as central banks CBDCs.
Public fears cash over COVID-19 pandemic
In the third bulletin of BIS titled, “COVID-19, Cash, and the Future of Payments” the bank highlighted the growing fear of the use of physical cash, despite scientific evidence of low chances of contracting Coronavirus through cash. This growing fear may set in a rush across governments in the quest to develop CBDCs and other digital forms of payments, the report further states.
“Looking ahead, developments could speed up the shift toward digital payments. […]The pandemic may amplify calls to defend the role of cash – but also calls for central bank digital currencies.”
However, with half of the world lacking these digital payments, a sudden shift to such payment systems may set a divide especially in these times of the pandemic. The researchers said,
“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 could open a divide in access to payments instruments, which could negatively impact unbanked and older consumers.”
A broader look into digital payments
Governments across the world including Asia, Africa, the Americas, and Europe have started embracing digital payments on mobile phones and digital currencies. The U.S government stimulus bill proposed a digital ecosystem to disburse the funds to millions of Americans.
Argentinian governor, Jorge Capitanich of Chaco province, urged the use of digital payment systems across his state to phase out the use of physical fiat money during an internet call with the President, Alberto Fernández