Shift in Payments Behavior Brought by COVID-19 Pandemic

By Kapil Gauhar

A move in payments habit brought on by the Coronavirus pandemic – and concerns that fiat currency may be a vector for the disease’s spread – could spike interest for virtual methods like Central Bank-issued Digital Currencies (CBDC).

That is one finding in a Bank of International Settlements (BIS) announcement from April 3, 2020, which says that –

“The COVID-19 pandemic has led to unprecedented public concerns about viral transmission via cash.”

The notice points out –

“Scientists note that the probability of transmission via banknotes is low when compared with other frequently-touched objects.”

Following the notice, central banks have found a way to sterilize paper currency, for instance, to help assuage such feelings of dread.

In any case, as the notification’s authors wrote –

“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. 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.”

One potential result –

“Resilient and accessible central bank operated payment infrastructures could quickly become more prominent, including retail central bank digital currencies (CBDCs).”

Undoubtedly, the notification doesn’t predit that CBDCs – which generally exist in the domain of research and experimentation, with further developed efforts seen coming out of China’s central bank – but a tenacious pandemic scenario could move the scene fundamentally.

The notification includes –

“With regards to the present emergency, CBDC would specifically must be planned taking into consideration get to choices for the unbanked and (without contact) specialized interfaces appropriate for the entire populace.”

The notice concluded –

“The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.”