Innovation thanks to hygiene

The importance of cash in our society is a topic that the SBA has examined in the past. Prior to the COVID-19 pandemic, cash was the most popular form of payment in Switzerland, as the latest Swiss Payments Monitor of the University of St. Gallen confirms. A survey conducted by Moneyland.ch at the beginning of this year showed that 78% of respondents were reluctant to or did not at all want to stop using cash.

Has this preference changed fundamentally since the outbreak of the COVID-19 pandemic? The answer is: no. It is common knowledge that cash passes through many hands, and it is thus perceived as an ideal vehicle for spreading SARS-CoV-2. Dispensing with cash for hygienic reasons is understandably a popular response. However, the recommendation to “pay by card only” that often goes hand in hand with this does not automatically improve the situation. On the contrary: the Bank for International Settlements (BIS) has identified credit or debit card transactions that require a PIN code as the form of payment that is most conducive to spreading SARS-CoV-2. Not only is it believed that the virus can survive for up to 72 hours on plastic, but a PIN-entry terminal in a busy store is touched by many people during the course of a day. Cash, on the other hand, changes hands only a few times a day.

Consequently, the discussion surrounding changed payment behaviour during the corona crisis should not focus on “cash vs. cashless” (1). A much more suitable and forward-looking approach is to focus on the “form of contact” (2).

Changed payment habits in times of COVID-19

At first glance, recent data appear to confirm people’s gut feeling that cash is the big loser in the COVID-19 pandemic. For example, during the lockdown, around 33% less cash was withdrawn at automatic tellers until the end of April. However, if this finding is compared with the figures of Dr. Tobias Trütsch (University of St. Gallen) and the decline in the volume of credit cards used at in-store points of sale over the same period (also -30%), it becomes clear that the reduced use of cash is primarily due to an overall drop in consumption and a massive reduction in the range of entertainment opportunities.

Credit card transactions can be made by entering a PIN (with contact) or via a   or an integrated NFC chip (contactless). The actual changes in payment habits only emerge when credit card sales are analysed: the percentage of contactless credit card sales as a share of total credit card sales at in-store points of sale increased by more than 10% between the end of February and the end of April. In contrast to the decline in the use of cash, this change in behaviour is likely to be long term.

The latest figures from other providers of contactless payment options (e.g. TWINT) confirm this trend and it is in this domain that the big winners in the COVID-19 pandemic can be found. This is also where the most innovation can be expected in the future. Payment transactions will no longer be the exclusive domain of established providers. Companies that were formerly not part of this industry such as Apple, Google or Samsung – in cooperation with financial services providers – now play a key role in payment transactions.