Coronavirus and digital payments

NOTE: In no way is the content of this post intended to provide medical advice. See an MD for that.

covid-19-4922384_960_720In 1986, the president of the company that markets LifeStyles condoms referred to AIDS as “a condom marketer’s dream.” Jerry Della Femina, founder and president of the advertising agency handling the Lifestyles account, immediately retorted, “AIDS is not a marketer’s dream, it’s a human nightmare”—and resigned the sizable account. He was cheered the world over.

I chose to open with that incident before reporting on the possible effects of the coronavirus pandemic on digital payments. I want to be clear that I am NOT suggesting that the pandemic is in any way a good thing. It is a human nightmare. 

(I shuddered when a recent Forbes piece used the phrase, “For MoneyGram the epidemic is both a blessing and a curse.” Let’s not tar and feather the author. I do not suspect heartlessness, just a quick but poor word choice.)

That said, the pandemic will surely affect the digital payments business.

I’ll begin with this, from BrokerNewsWire:

Because of the proliferation of cases of COVID-19, also known as coronavirus, the World Health Organization (WHO) recommended that governments and citizens make payments through mechanisms that do not involve direct contact between the parties or with cash. According to media reports, a WHO spokesperson said in an interview that “people should use non-contact [payment] technology as soon as possible,” which in the eyes of many analysts and experts opens up important spaces and opportunities for digital currencies.

In Italy, where digital payments have been slow to catch on, dramatic increases in diagnoses may catalyze more conversions. According to S&P Global

Cash is at the heart of day-to-day economic life in Italy, making up 68% of transactions at point of sale by value, according to a 2017 research paper from the European Central Bank. But N26 GmbH, a German-based digital bank that has around 500,000 customers in Italy, is already seeing indications of changing customer behavior as a result of the outbreak. “In the last weeks we registered a slight increase in the number of mobile wallet transactions, and we expect this trend to continue, as more people adjust their everyday habits to reduce the risk of transmission,” Andrea Isola, N26 general manager for Italy, said in an email.

While the pandemic may bolster digital payments, ecommerce may be another matter. On one hand, people who prefer to self-quarantine at home may be likely to turn to ecommerce rather than show up in person at retail stores; but on the other, escalating travel restrictions and increasing numbers of people remaining at home leaves fewer people to deliver ordered goods. A PYMNTS.com piece reports that “avenues of transport seem to be getting increasingly choked off. That means goods that have already been produced, or have been ordered or are getting ordered, are unlikely to arrive on doorsteps.” Moreover, 

… if supply chains are truly disrupted (we’re thinking here about consumer goods, such as tech-related or pharma items), the ripple effects may be that inventory in the pipeline is held up, and it will take a while for that new inventory to reach end customers, and then for new demand to materialize and bring those plants back online.

Not surprisingly, there is a certain amount of panic when it comes to handling cash. PaymentsSource recently speculated that the coronavirus could …

… cause a drastic change in payment habits, as consumers shift to digital channels to reduce their risk of infection from handling cash. Many regions are already seeing a rise in contactless transactions, which could be seen as less prone to spreading disease than the handling of cash or paper checks.

According to Bloomberg, increasing numbers of stores are asking customers to avoid the use of cash if possible. 

And across the financial industry, a rigorous debate is brewing over how to address the public’s mounting concern that greenbacks might transmit Covid-19. Studies show it’s at least theoretically possible for other coronaviruses to survive on the dollar’s cotton-and-linen weave, though there’s little agreement on the actual risk of contagion. Fear of dollars is now palpable in the U.S. epicenter of the coronavirus.

Reuters has reported that South Korea’s central bank “was quarantining bank notes for two weeks to remove any traces of coronavirus and even burning some as part of efforts to stem the outbreak.”

The Bank of Korea (BOK) said it is also putting currency notes through a high-heat “laundering” process, as it always has, before releasing them for circulation. “For all cash coming to the central bank from local banks, the Bank of Korea will keep it in a safe for two weeks, given that the virus usually dies out after nine days,” a BOK official told Reuters.

Even so, paper currency is considered a lower-risk conveyor. Coughing and wheezing pose the greater threat. According to The Financial Brand, the World Health Organization has simply recommended hand washing after handling cash as “a common-sense precaution.”

Any havoc the pandemic wreaks on the global and local economies and any effects it has on the payments business pale in comparison to the cost of lost human lives. I am all for the growth of the digital payments industry. But not this way.

Leave a Comment