COVID-19: Facilitating the cash consumer in a crisisApr 06, 2020
As the world continues to adjust to a temporary ‘new normal’, the social impact of COVID-19 is beginning to have a significant effect on everyday behaviour, most notably in countries where governments have imposed the most severe social distancing measures. Approximately a quarter of the global population was being limited in its activity in some way when India Prime Minister Narendra Modi announced that there would be a restriction of movement in the country for 21 days. This percentage may even increase in the coming weeks.
In many countries these physical distancing measures include the closure of all but the most essential retail outlets, such as supermarkets, pharmacies, and convenience stores. Because of this, COVID-19 is going to influence how consumers buy products and services, certainly in the short-term and potentially in the longer-term as well.
A move to digital commerce
One of the most obvious changes coming into effect immediately is a growing reliance on digital commerce for all non-essential products and services. And for the many consumers that have done all, or the vast majority, of their purchasing in person to date, this will be a new experience. Even where consumers are able to still make purchases in-store, this is only for essential items, and in most countries consumers are advised to visit as few stores as possible. For their own health, and in order to abide by government regulations, consumers must dramatically reduce the amount of shopping they do in-person and instead rely on online retailers. This change will last until at least the end of the COVID-19 crisis, and perhaps much longer.
Cash remains a strong preference in some countries
One reason that people have avoided digital commerce previously has been a reluctance to share their financial details online or have a digital record of their purchases. Traditionally these types of consumers have relied on cash to make payments. Another group of consumers that has traditionally been heavily dependent on making cash payments is the financially excluded, including the 40 million European citizens who currently do not have a bank account. For these consumers, accessing digital commerce has always been an uphill challenge.
There are consumers that prefer to make payments in cash all over the globe, but there are also countries where a preference for cash is particularly prevalent. Take Germany and Austria for example. Consumers in these countries are already pre-disposed to relying on cash for payments; according to S&P Global, in 2017 almost half (47.5%) of all transactions in Germany including online payments were still conducted in cash. Research by Deutsche Bank indicated that 74% of in-person payments in Germany are still completed using cash.
So it is not surprising that Germans and Austrians carry much more cash on them than consumers in countries such as the UK. According to Deutsche Bank the average German carries €107 in cash; separate reports have stated that the average German carries €103 and the average Austrian carries €89. According to our research the average UK consumer carries £21 in cash at any one time.
While cash usage in the UK has halved since the scaling up of physical distancing to combat COVID-19, German consumers have taken a very different approach. According to multiple media reports including the Financial Times, the volume of cash withdrawals in Germany has doubled since the COVID-19 virus outbreak.
Combatting contactless payments
Another recent development that is having a significant impact on cash consumers is retailers encouraging consumers to use contactless payment methods. Even though the World Health Organisation has made it clear that it hasn’t issued a warning about handling banknotes specifically, some retailers are still banning the use of cash in their stores on the grounds of health concerns.
Even in traditionally cash-dependent Germany there appears to be some momentum behind refusing to accept cash payments in store. One consequence of this has been a surge in contactless payments in the country, and this is only going to increase further as countries raise the limits to enable more transactions to be contactless. For consumers that are unwilling or unable to make this switch eCash may be the only method to continue using cash to make purchases.
eCash: Bringing the cash consumer to digital marketplaces
The shifting circumstance to relying on digital commerce and the rejection of cash in stores will not be straight forward for cash consumers. Many will still want to use cash as their main source of payments; but to do so while still adhering to the social distancing guidelines means taking cash purchases out of the realm of stores and instead making cash transactions online.
So online businesses need to take this into strong consideration when thinking about how to evolve their user experience to win these new customers in the short and long term.
During this period of social and economic uncertainty, providing as smooth a transition from in-store to online payments as possible will strongly appeal and may even provide a competitive advantage. By enabling consumers to still pay with cash a merchant not only gives the buyer the peace of mind that their concerns with online payments are alleviated, but also a sense of familiarity with the transaction they’re making. This may provide welcome relief in an environment where a sense of normality is unfortunately currently lacking.
The most efficient way to accept cash as an online business is by integrating an eCash solution into an online checkout. Consumers are then able to pay for a product or service using a prepaid account that is topped up by cash, or make a purchase online and then complete the transaction at a physical pay point (such as a convenience store) with cash. By using these payment methods the buyer has the option to maintain their relationship with cash as their primary payment method.