Trader logo

Is Covid-19 really killing cash?

Everybody has heard the motto "Cash is King". But is it really or is Covid-19 just killing it? The king is dead, long live the king.

By Fintech ReviewPublished 3 years ago 4 min read
Like
Is Covid-19 really killing cash?
Photo by Jp Valery on Unsplash

Everybody has heard the motto “Cash is King” right? But is it really? Or is it slowly dying and Covid-19 will be its final blow? The King is dead, long live the King.

It depends on the kind of cash we are actually talking about. There are two types of cash. Firstly, you have cash as an asset class and secondly, physical cash as a form of payment.

The former is definitely king and not particularly dying for many reasons:

  • in times of massive economic crisis like today, the value of most asset classes crashes (even momentarily) but cash doesn’t
  • its value stays the same in the meantime, excluding foreign exchange and inflation obviously
  • but there is little to no inflation in a crisis, or better yet disinflation or even deflation, therefore cash either has its value holding or increasing (i.e. a rare scenario in which you need less money to buy the same thing, contradicting the time value of money)
  • you can be the most successful business in the world, if you are low on cash, you will go bankrupt (the proverbial ‘Cash is King’ comes from that)
  • same goes for your personal finance, cash and cashflow are king (Rich Dad’s Cashflow Quadrant is a great book about that by the way)
  • at the end of the day, any other asset class such as equity or real estate is only worth what it can be converted in cash at a given time

That’s why cash is king in the land of fluctuating asset classes. Although, it is worth noting that central banks all over the world printing money like there is no tomorrow is having serious effects on many asset classes. The infamous quantitative easing coupled with low to negative interest rates. In theory, the more money is circulation, the more it costs in terms of greenbacks or else to buy things, whatever it is (in theory though, that is Basic Economics as Thomas Sowell would say). In practice, there is a lot of asset inflation but not really consumer goods price inflation. So the little economic and monetary policy experiment is not really working. At least for the average person. If you are asset-rich, it’s great.

Money, money, money…

It is not really the same story for physical cash… Not particularly king in the payments world these days. Its usage as a payment mechanism is consistently going down.

Cash payments are likely to stay but usage is on a slow decline in the UK. And this is also true in many countries around the world like the USA, China, across Europe, but also in developing countries. Cash was king but people use more and more cards and digital payments. It is obvious that Fintech emerging as a strong industry post-Great Financial Crisis has had a massive impact on cash payments. From democratizing mobile payments to introducing innovation in point-of-sale card payments, like iZettle or Square.

And now that we have a global pandemic disrupting all our lives, digital payments are absolutely booming. It makes sense for two main reasons.

Firstly, using debit or credit cards, notably with contactless payments, means less contact with people. In case you did not know, cash is one of the dirtiest thing you can touch during the day. Think about it, you do know where that Dollar bill has been, do you? And when you have a deadly virus spreading around, the last thing you want to do is touch something that facilitates its propagation.

By Kelly Sikkema on Unsplash

Secondly, billions of people around the world are or have been in lock-down, stuck in their houses. Therefore, volume of online orders, and particularly good old Amazon, are exploding. That makes perfect sense, if you cannot go shopping to your favorite mall, you order online. And you are not going to pay cash online, are you?

So, is Covid-19 really killing Cash?

This pandemic could have long lasting impacts on the economy and the business world, and the way we pay for things is no exception.

Let’s just say that cash was already on a slow decline. It might stick around as a form of payment for a while though, because it some cases, it remains the most convenient way to pay. However, what is really killing cash is not so much the current pandemic but rather innovation in payments, which started 10 years or so ago when Fintech emerged. And the sector will continue to innovate, that is a certainty.

Better alternatives to cash are the real reason its usage is decreasing so much. However, it is true that Covid-19 is not helping its case, and could very much accelerate its death…

Fintech Review

economy
Like

About the Creator

Fintech Review

Insight, analysis and news about Fintech topics

Reader insights

Be the first to share your insights about this piece.

How does it work?

Add your insights

Comments

There are no comments for this story

Be the first to respond and start the conversation.

Sign in to comment

    Find us on social media

    Miscellaneous links

    • Explore
    • Contact
    • Privacy Policy
    • Terms of Use
    • Support

    © 2024 Creatd, Inc. All Rights Reserved.