Why cashless economy should rein post Covid-19 pandemic

BY ANTONY MUTUNGA

Social distancing and staying at home have become the new norm for most in the face of the Covid-19 pandemic, which has not only seen hygiene take centre stage around world but has also elicited the argument on whether it is time to fully adopt a cashless society?

The pandemic has seen the use of physical cash reduce especially in developed countries. As customers make the shift to rely on plastic money, businesses that had already adopted cashless transactions are soaring as compared to those whose only mode of transaction is by way of hard cash. 

With the virus able to remain viable on surfaces and plastic for upto three days, paper currency, which has been proven to hold eukaryotes, bacteria, viruses and archaea, might increase the spread of the Covid-19 pandemic. This is evident in the fact that in the epicentre of the pandemic, China, the Government ordered the disinfection of cash. 

In order to push for a full cashless economy, there is a need to incorporate digital technology in the informal sector and advocate for a reduction in the charges of mobile money services. With Sweden looking to become a fully cashless society in 2021, it may not be time for the world to follow suite but that is a start

In the early days of the pandemic, the Chinese Government instructed banks to ensure that only sterilized new bills were issued. Banks were also required to disinfect potentially infected paper money using ultraviolet. The decontaminated cash was then to be stored up to 14 days before it was circulated back to the economy. The Chinese Government even went further to remove any physical cash from high risk areas, treated it and held it in the People’s Bank of China.

In developing countries, a cashless system has already been implemented in a number of countries especially in Africa. For instance, Kenya adopted Safaricom’s M-Pesa, a mobile money platform in 2007 and today it has become one of the leading modes of payment in the country. In fact, this helped the country to leapfrog the use of plastic cards all together. 

As a result, during the pandemic, the Kenyan Government was able to enter into partnership with the dominant telco operator, Safaricom, to help curb the spread by encouraging cashless transactions through removing of charges for transactions below Sh1, 000 until June 2020. Safaricom also increased the daily transaction limits for small and medium sized enterprises (SMEs) using the platform from Sh70, 000 to Sh150, 000. Kenyans will also be able to transact up to Sh300, 000 up from the current limit of Sh140, 000, and hold up to Sh300, 000 in their M-Pesa accounts.

Despite cashless transactions increasing throughout the country and the world, physical cash, especially in developing countries, is still a preference for many. This is because mainly in developing countries, the informal sector is the leading employer and a majority of those who work in the sector are usually paid with physical money. In fact, according to FSD Kenya, only about 10% of people’s income is born digitally, making it an extra step to move money into the digital environment.

All these measures are only for a short time. Once the spread of pandemic curbed and the telco decides to shift back to its norm, then physical cash will once again be preferred especially with the return of daily transaction limit for SMEs that is usually an inconvenience for those who deal with large amounts of money daily as well as the transfer charges which have deterred those who are cost-conscious and of low-income households from shifting to using mobile money platforms.

In the developed world, the use of plastic money has not assisted much as with physical cash, the virus can remain viable on the credit cards and debit cards. And with security and privacy being a concern, most people do not trust online transactions. As such, when the pandemic has passed, it is highly likely that most people will go back to using paper money.

Without a doubt, a cashless society is safe for everyone now so as to avoid contact. However, after the pandemic has passed, there are factors that will see many shift back to the physical cash. 

In order to push for a full cashless economy, there is a need to incorporate digital technology in the informal sector and advocate for a reduction in the charges of mobile money services. With Sweden looking to become a fully cashless society in 2021, it may not be time for the world to follow suite but that is a start.  

Writer is a member of NBM’s inhouse editorial team and lead business researcher

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