Did COVID19 kill cash?
I have had a €50 note in my wallet since 12th March 2020. I remember the date as it was the day of the famous speech by Taoiseach Leo Varadkar to the people of Ireland announcing the lockdown. Over the following 3 months I noticed that cash was no longer King for two reasons.
Firstly, people didn’t want to handle cash as it was associated with being “dirty money” in a time when the whole country has been focused on being super sterile and socially distant. Cash has always worked on the basis of hand-to-hand contact and if you are no longer in direct physical contact then it simply doesn’t work. The second thing that happened that technology filled the gap for payments — instantly. In Ireland we have had a grip on cash for far too long as our primary means of doing business. Maybe its a historical legacy or maybe its a lack of faith in banks since the last bust but we seemed to have been slow to move to digital payments compared to other countries. That all changed on 12th March 2020.
The single biggest action that the Government took that signalled the end of cash was the raising of the card tapping limit to €50. Suddenly, the vast majority of day to day cash based transactions could be tapped and go. I would like to think that some bright spark in Goverment saw this as an opportunity to increase tax taking coffers at the same time as keeping the public safe — but we will come to that later.
As a web developer — I saw an immediate (and its still going) high demand for SME’s to get online and sell online. On the same night as the lockdown was announced my local GP rang me and said “I need to get setup with a website by tomorrow or I am out of business”. Thankfully, I was able to get him sorted with an appointments system and digital payments via Paypal and Stripe. At the same time the Local Enterprise Boards rolled out Business Continuity and Trading Online Voucher Schemes which means that SME’s could get selling online without having to pay the costs themselves. The local barber is just about reopen with a full online booking and prepayment system. The local restaurants have now all switched to using QKangaroo for orders and payments all online. Even a local solicitors office is just about to roll out virtual prepaid legal consultations for remote clients.
So as phase 3 approaches on the 29th June 2020 with most businesses allowed to reopen in Ireland where will cash play a roll. Honestly, I dont know if it will anymore. Companies like Revolut have been waiting for a watershed moment like this to be the tipping point for the move to micro payments. Whatsapp have rolled out person to person payments in Brasil from today. Facebook is pushing hard to get its currency Libra launched and all the while apps like Google Pay and Apple pay have moved from being the play toy of tech geeks onto the phones of soccer moms.
The shock to some businesses will be severe. I am thinking of businesses who traditionally have relied heavily on cash transactions will probably see the biggest change. Every customer will want to pay electronically and cashflow might become critical. Imagine taking 20k over a weekend but not having in arrive into you business bank account until 5 days later. You may want to have a hefty overdraft facility with your local bank manager — if you can find one anymore. The oppertunities for Revolut, Facebook or Paypal to extend you that overdraft are obvious. That will be the final nail in the coffin for trad banks.
Surely the biggest winner (apart from the payment processors) will be the Government. With all of these transactions now becoming clear and traceable and taxable the likelihood is that their will be an increase in the Government coffers from VAT — but only from the businesses who survive. Cash is no longer King — the switch to digital payment has happened.
Anyone got the change of a 50?
