In times of coronavirus, what do we do with money?

MEXICO CITY.-The coronavirus is affecting all aspects of our lives and the domestic economy is no exception. In times of war against an invisible enemy, a new issue has emerged that will affect the usual modus operandi of Latin Americans: The use of cash.

Although money has not been considered as an element of transmission of the virus, at least not officially, the fact that some viruses of the same family, such as SARS or MERS, can survive on glass, plastic or metal for up to nine days, but also on paper and cloth, warns of the probability that the risk exists and that, as money is handled by many people several times a day, the contagion of COVID-19 increases. 

In order to avoid contagion, COVID-19 is generating changes in people's habits. One of them is the constant disinfection of objects and another is avoiding contact with other people.

Therefore, despite the fear of transmission, the pandemic, which can currently only be controlled by social isolation, will inevitably reduce the use of money in banknotes and may be the driving force behind the start of new consumption habits, even among people who are most attached to the use of “cash”.

Pre-Coronavirus Scenario

The preference in Latin America for physical money is confirmed in each study or survey on the subject. According to the company specializing in financial services, besttreatment.com.mx: More than 801% of Latin Americans choose to pay for their daily consumption with cash and alludes to the fact that the prevailing use of cash in Latin America to make transactions is related to: 

• bank account fees: they charge for a transaction, they charge for a query, they charge for requesting a statement, in some cases they even charge for a withdrawal; 
• the widespread distrust of citizens in the American banking system;
• deep-rooted cultural habits;
• Limitations in access to banking means: 45.6% (207 million) of the adult population in the region still does not have access to the financial system 
• lack of financial and digital education;

Globally, the trend is the same: people in advanced economies consider it their preferred payment method.

In Germany, Italy and Japan, 90% of all transactions are still made with cash. One of the major exceptions is China, which is adopting a low-cash business model with its President encouraging the use of digital currencies, urging accelerated adoption of blockchain technology by the end of 2019.

According to banking experts such as Deutsche Bank, this would pose a serious threat to the US dollar.

At the national level (approximately 150 million inhabitants), cash remains the main means of making payments: 9 out of 10 Mexicans use bills and coins to cover their daily expenses. 

Until just a few months ago, paper money refused to disappear.

Current Scenario | Some measures taken by different countries

Social isolation is the only way known to prevent the spread of the virus, and banks are taking steps to strengthen their online services by promoting the use of digital channels to carry out financial transactions. 

In addition to measures to facilitate access to electronic money and despite the fact that cash itself is not officially considered a source of contagion, some countries have decided to disinfect coins and bills to stop the spread of the coronavirus, which also discouraged their use. 

The end of cash has been talked about more and more regularly, but reality showed us a situation that was not so immediate. In the end, the virus would end up being a trigger for the use of credit and debit cards in the long term, either due to the banking measures taken, because merchants would start to accept only online payments due to social isolation or because governments could start promoting this payment method in order to avoid the spread of the coronavirus through money, turning this quarantine into an unexpected access to the world of online payments and e-commerce.

The fact that we cannot interact as we did before will accelerate the financial decision-making process of individuals, governments and financial institutions aimed at reducing their use.

Although it is difficult to change habits and adjust the entire system to new modalities in the midst of a quarantine and for them to become socially established, it is observed that if the authorities take action to discourage the use of physical money and thus begin to operate mostly with electronic money, it can change the daily operation of consumption forever.

Some Banking Measures Taken in Latin America

In Colombia and Peru, the president of Grupo Bancolombia and the manager of Banco de Crédito (BCP) in Peru respectively, promote digital channels that avoid the displacement of clients to the offices and provide security in their transactions.

In Brazil, the country's Central Bank has issued statements in which, in view of the restrictions on being served in financial agencies and by telephone, it suggests the use of electronic means to carry out operations: Direct Messages (chat), Electronic Transfers, Internet Banking, Applications and Digital Services and in turn recommends that for payments in general, electronic means should be used whenever possible, avoiding handling bills and coins.

In Mexico, the Secretary of Finance and Public Credit, Arturo Herrera Gutiérrez, announced within the framework of the Banking Convention that mitigation measures are being taken, including, among others, the activation of credit lines.

In Argentina, the Central Bank of the Argentine Republic (BCRA) ordered that banking and financial institutions cease operations in branches, and will only be authorized for the payment of pensions and family allowances. ATMs will be open 24 hours a day for debit card withdrawals, they have increased the withdrawal limit and offered bonuses and credit options. Financial system entities have increased hygiene measures in branches and ATMs and recommend the use of electronic payment methods.

 Countries that no longer accept cash and others that decided to “launder” their money  

In several regions of Spain, cash is no longer accepted for paying bus or metro fares. Payment can only be made with credit or debit cards, or with the card used by the transport company or region.

In the United States, fears of infection through cash have begun to grow. The paper used to make US dollars is 75% cotton and 25% linen, which allows germs to remain on these surfaces for longer than on other harder and smoother surfaces. For this reason, a large number of shops refuse to accept physical money and only accept credit or debit cards and prepaid cards.

In China, the central bank has ordered all banks to carry out a deep cleaning and disinfection process of cash in an attempt to contain the spread of the virus through physical money.

The Hungarian National Bank (MNB) announced that it will quarantine forint banknotes and other currencies in circulation in the country in order to disinfect them. The process involves wrapping the banknotes in shrink wrap and storing them in a container for two weeks, before undergoing a brief heat treatment of between 160 and 170 degrees Celsius. Follow us by clicking on the star

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