COVID-19 and the Cashless Society

As my long-time readers know, one of my beliefs is that we are heading towards a completely cashless society.  While central banks and government regulators use the excuse that banishing cash will reduce crime, particularly money laundering, there is a newly minted reason why the issuance of physical currencies could be coming to an end.

Here is a recent news story from Yahoo Finance:

The World Health Organization spokesperson also made the following comments:

"We know that money changes hands frequently and can pick up all sorts of bacteria and viruses.  We would advise people to wash their hands after handling banknotes, and avoid touching their face.  When possible it would also be advisable to use contactless payments to reduce the risk of transmission."

The same story was reported by the Telegraph, one of the United Kingdom's most influential purveyors of news:

In case you should happen to think that the idea of contaminated bank notes is completely ridiculous, here is a news story from the South China Morning Post (SCMP) dated February 16, 2020:

According to the SCMP, Fan Yifei, Deputy Governor of the People's Bank of China (PBOC) said that 600 billion yuan (equivalent to US$85.6 billion) worth of new banknotes had been distributed throughout China between January 17 and mid-February including 4 billion yuan (US$572 million) distributed directly to Wuhan.  China's central bank had withdrawn currency worth 7.8 billion yuan from circulation between February 3 and February 13, 2020.  The PBOC stated that it would use high temperatures or ultraviolet light to disinfect the bank notes and would then store the currency for more than 14 days before putting it back into circulation.

Here is the announcement in full from the PBOC website:

...and here is a question posed to Fan Yifei by a journalist with the Economic Daily:

"There have been rumors recently that cash may spread viruses. How does the PBC ensure that the cash we use is safe and sanitary? The epidemic has also made everyone appreciate the convenience of non-cash payments. How will mobile payments play a role in supporting people’s livelihood in the future? Thank you."

Here is his response with the key points highlighted:

"In the wake of the outbreak, we placed a high priority on the safety of cash use by the public, and also took measures in this respect. First, supply of new banknotes have been ensured. Prior to January 17 this year, the PBC had allocated nearly RMB600 billion of new banknotes across the country, and immediately sent additional RMB4 billion yuan to Wuhan before the Spring Festival. The move improved the sense of security of bank branch staff and customers of cash services. Secondly, we have made scientific and reasonable arrangements and allocation. We have suspended intra-provincial cash transportation in some severely affected areas and inter-provincial cash transportation. Personnel movements were minimized to reduce the risk of infection and transmission in travelling. Third, we have ensured that the cash withdrawal and distribution are hygienic and controllable. Commercial banks were required to divide their cash operations into inward direction and outward direction. The cash distributed outward should mainly use new banknotes. The cash withdrawn from hospitals and agricultural markets should be treated specially and sealed separately. After disinfection, it shall be deposited at the PBC and not be paid outward. Moreover, we released the Guiding Opinions on Strengthening the Security of Cash Use During the Period of Epidemic Prevention and Control, which required the PBC branches and commercial banks to follow the mentality of categorized management and adopt differentiated control measures according to local epidemic situation to ensure safe cash use. The cash withdrawn from key areas of epidemic control should only re-enter the market after disinfection with ultraviolet or high temperature and storage for more than 14 days. The cash from other areas, should be stored for more than 7 days after disinfection before re-entering the market. The current measures have proved effective. We aim to ensure the safety and hygiene of cash for people’s use.

Next, we will speed up promoting the work in mobile payments. At present, the businesses in this field are developing so rapidly that the compound annual growth rates of the number and value of mobile payments have reached 83.5 percent and 39 percent respectively in the last three years. China’s electronic payment is fairly advanced. Recently, there have been interesting news in many areas, such as “vegetable baskets without meeting” -people order and pay on their mobile phones, receiving fresh and affordable meat, eggs, vegetables and fruits without going out, which has resolved a major problem in people’s lives during the epidemic outbreak. More measures will be taken in encouraging online banking, mobile banking, and other channels to provide customers with 24/7 services in financial investment, utilities payment, and online shopping. Cloud Quick Pass, UnionPay’s mobile payment app, provides various online payment services such as fund transfer, credit card repayment without service charges, mobile phone top-up, and utilities payment. It supports balance inquiry of 610 banks across the country and credit card bill inquiry of nearly 150 banks. We are all working on this progressively in an orderly way. Thank you."

Even Communist China is using the coronavirus outbreak as an excuse to promote mobile payments (i.e. cashless payments).

Now, the central bankers have yet another excuse to rid the world of nasty banknotes.  The advent of a cashless society is nearly upon us and the current outbreak of COVID-19 could be just the excuse that they need to justify the move.