TORONTO -- As the pandemic loomed, Lillian Elliott and her partner Sheryl Davies headed to the ATM to stock up on a bit of cash. They haven鈥檛 touched it since.
The residents of Montague, P.E.I. had made it a habit of budgeting using cash in envelopes but since fears of transmission of COVID-19 has given widespread pause to handling bills and coins, the two have entirely shifted to using a credit card for expenses.
鈥淚 just don鈥檛 want to be touching money right now,鈥 says Elliott, but she can鈥檛 foresee how shifting entirely away from cash would work in a place where every few houses has a table selling plants and produce and fishermen sell freshly caught lobsters right from their boats.
鈥淭hey aren鈥檛 going to take cards or e-transfer for that,鈥 Elliott told CTVNews.ca. 鈥淲e buy free-range eggs for $3 a dozen from a woman who raises chickens on an old school bus. She鈥檚 not going to take credit cards. I worry about the independent people who are working to make money on the side.鈥
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Cash is an engrained part of our human existence.
But in this pandemic time, cash is also kind of taboo. Some merchants, including Loblaws and Tim Hortons, are urging non-cash payment and others, including Longos, Best Buy and Indigo are outlawing physical money altogether, over fears that bills and coins could be contaminated with the coronavirus and the exchange of money breaks physical distancing advisories.
A surge in online shopping, curbside pickup, and meal home deliveries is also driving a non-cash life.
鈥淲e project the pandemic will accelerate several years鈥 worth of digital transformation,鈥 says Stacey Madge, country manager and president of Visa Canada.
, 62 per cent of Canadians reported using less cash and 42 per cent had avoided shopping at places that don鈥檛 accept contactless payments. Many users of e-transfers, PayPal and credit cards said they were using them more.
鈥淲hile we have seen a continued shift towards digital payments over a number of years in Canada, there鈥檚 no doubt that the prevailing pandemic has accelerated this shift 鈥 and will likely act as a catalyst in transforming the Canadian payment landscape forever,鈥 said Tracey Black, CEO of Payments Canada in a press release.
took place in April, up 62 per cent year over year, and first-time users increased by 43 per cent since mid-March.
Contactless is key in these physically distancing days.
About half of consumer spending on Visa cards in January was face to face. In just weeks, 60 per cent of spending was what is called 鈥渃ard not present鈥 in the business. That was mostly driven by grocery delivery or pickup and restaurant delivery, says Madge.
To minimize the touching of PIN pads in stores, banks and credit card companies raised the limit on tap transactions from $100 to $250.
As we continue to adapt our ways of buying while the virus still lurks, digital habits are forming. People who never used banking apps or e-transfers are testing the waters. And those who already heavily used plastic and phones to pay for life鈥檚 expenses, are relying on them even more.
But how far can this all go? Could we one day only find a $20 bill or a toonie in museums or dusty boxes in the attic?
鈥淚t鈥檚 certainly possible we could get there but I suspect it won鈥檛 happen in my lifetime,鈥 says Koker Christensen, co-leader of the financial services group at law firm Fasken in Toronto.
鈥淭here is a certain percentage of the population that likes the anonymity of cash and don鈥檛 want to pay the fees that come with digital payments.鈥
But he does think this pandemic is ushering in a permanent shift.
鈥淭he trend away from cash was already existing and it鈥檚 only being accelerated. We won鈥檛 go back to the way we were before.鈥
THE LONG DECLINE OF CASH
According to the Bank of Canada, with a value of more than $93 billion. Sounds like a lot, but .
鈥淐anada overall, is a very low cash-usage country. Of about a trillion dollars in personal consumer expenditures, less than five per cent of that is cash,鈥 says Madge.
One study in 2017 concluded , topping the list because the country had more than two credit cards per person and because 57 per cent of payments were cashless.
found that about one in 10 respondents said they were entirely cashless.
The flight from cash has only climbed since.
At the end of 2019, about 73 per cent of total transaction volume in Canada was electronic, says Ramesh Siromani, senior vice-president of enterprise payments at RBC, and cash use has declined about 40 per cent in the last five years.
That鈥檚 due to the growing convenience of debit and credit cards, the reward perks that come with using plastic, and technological advancement that is leading to digital wallets on smartphones and wearables.
But cash isn鈥檛 going down without a fight.
that about 81 per cent of survey respondents said they had used cash in the last week.
The Bank of Canada says demand for cash has been relatively stable for more than three decades. That鈥檚 driven largely by growing demand for $100 bills 鈥 not for payments (after all, they aren鈥檛 taken by some merchants and aren鈥檛 available through ATMs), but rather for 鈥渟avings or precautionary purposes.鈥
In a number of discussion papers, , but always under the premise that consumers and businesses just stop using cash. In other words, cashless-ness isn鈥檛 forced on Canadians, but driven by them.
It鈥檚 interesting to note, though, that while the costs of producing and processing bank notes was nearly $61 million at the end of 2019, according to the Bank of Canada, the federal government actually makes money 鈥 about $1 billion a year 鈥 by issuing money.
It鈥檚 an ancient concept . Simply put, it costs about 42 cents to produce and distribute a bank note but banks pay for them at face value. The central bank invests what the banks pay in securities, which earn interest. So every note produced earns interest every year for its life span.
'TACTILE AND TANGIBLE'
Sadie Sea is a big fan of cash.
The Fraser Valley, B.C. resident only deals in bills and bartering. While the local farmers鈥 market is closed down, she sells eggs and honey outside her home.
鈥淚t鈥檚 been working for me. I鈥檝e only had one person say they鈥檙e not handling cash right now.鈥
Cash is a way of life for her and many people she knows, says Sea, who is in her 30s. She鈥檚 unsettled by the prospect of a drift to cashless-ness.
鈥淚 never thought it could happen in my lifetime, but now it seems possible.鈥
Sea, who recently traded a couple of dozen eggs in exchange for getting her lawn mower fixed and more to get a carburetor for her rototiller, says she has a general aversion to online life. But she really worries about the elderly and the homeless 鈥 she was once there herself 鈥 who don鈥檛 have the means to be digital.
Caterina Giovinazzo鈥檚 90-year-old mother once prided herself on heading down to the bank to pay her bills in person. COVID-19 has changed that.
鈥淢y mother鈥檚 losing her independence and she鈥檚 very unhappy about that,鈥 she told CTVNews.ca from her home in Ancaster, Ont.
Giovinazzo and her brother now take care of their mom鈥檚 finances through a banking app, which their mother neither understands nor trusts.
Maybe one day we will be cashless, but Giovinazzo, a retired schoolteacher, says she loves the feel of crisp bills. She puts them in cards for her now-grown nieces and nephews or gives them as tips in restaurants or salons.
鈥淏ills are tactile and tangible. People of my mom鈥檚 generation are not comfortable with e-transfers and some people my age aren鈥檛 good with computers or won鈥檛 deal with apps. My cousin is two years older than me and for the first time, paid a bill online because she was forced to during this time.鈥
WHY CASH ENDURES
The benefits of cash are clear. It鈥檚 simple, accessible, steady in value and almost universally accepted. It鈥檚 anonymous, doesn鈥檛 leave a trail, can鈥檛 be hacked, doesn鈥檛 rack up transaction fees, and is usable even when the lights go out or the internet shuts down.
Many credit counsellors urge consumers to budget through bills in envelopes. When the money鈥檚 gone, the spending stops.
Cash is also ideally suited to small, informal or one-off transactions: Think garage sales, roadside fundraisers, church fairs, bake sales, buskers, and panhandlers. Not to mention the tooth fairy, the swear jar and piggy banks.
And cash is the only method of payment that doesn鈥檛 require some sort of an account with a bank.
Bonnie Morton, a veteran anti-poverty advocate, thinks a cashless economy can only work if access to a bank account and the internet is treated as a human right. She says she works with many people who can鈥檛 get a bank account because of a criminal record.
Some on social assistance refuse to get a bank account because the government can look at them and claw back payments if there are deposits that can鈥檛 be accounted for, she says.
鈥淪o these people have to go to money marts to get their cheques cashed, which charge huge fees,鈥 says Morton, who is president of Canada Without Poverty, during an interview from her home in Regina.
鈥淚f we go to a cashless society, how do vulnerable people get what they need? A cashless society only works for those with enough money.鈥
Cashless-ness is neither inevitable nor desirable, says Bill Maurer, an anthropologist at the University of California Irvine who specializes in financial technology.
鈥淎s long as there are poor people or refugees and immigrants or the elderly or the disabled, where traditional financial institutions are not accessible enough, there will be a need for cash,鈥 he told CTVNews.ca during a phone interview from his home in Long Beach, Calif.
Between a quarter to a third of Americans are considered unbanked (have no connection to a bank) or underbanked (lack a debit or credit card or don鈥檛 use them because of fees), Maurer says.
The numbers are much lower in Canada, where the World Bank says 99 per cent of adults have an account with a financial institution. Almost 90 per cent have both a debit and a credit card, .
But there are other reasons cash endures, says Maurer, even among surprising groups. His recent research points to young people, who are entirely adept with mobile and digital, storing cash to check their spending and to save.
And many ordinary people are fed up with the fees of using digital money, says Maurer. Transaction fees, service fees, convenience fees attached by banks, credit card companies, payment processers, e-retailers, ride share and food delivery providers all add up for small businesses and consumers.
So for plenty of reasons, Maurer likens a cashless economy to a paperless office: much talked about and technically possible, but just too damn hard to achieve.
NO REASON FOR CASH
From the moment the Mad Radish started serving its upscale salads and bowls in Ottawa in 2017, cash was not welcome. Founder David Segal says there are plenty of reasons that made sense, long before COVID-19.
The restaurant, now with three locations in Ottawa and three in Toronto, caters to an in-and-out lunch-time crowd. Cash means lines build up. In-app payments or tap and go is fast.
Digital also means there is no need for staffers to count a till or risk delivering a bagful of cash to the bank at the end of the night, says Segal. The sales audit process is much simplified, too.
Segal, who also founded DavidsTea, says by the time he sold his interest in 2016, cash accounted for only about 10 per cent of transactions at the tea boutique鈥檚 storefronts.
鈥淚n 2017, when we opened Mad Radish, we saw no reason not to go without cash. It was trailblazing, but there were some people who weren鈥檛 happy about it at first,鈥 Segal said in a phone interview from Ottawa.
There are reloadable gift cards, say for tweens who want a healthy salad bowl but may not have a bank card. A few people early on arrived at the register with only a bill in their hand.
鈥淲e鈥檇 give them their food for free. But it hasn鈥檛 been a big deal. Now everyone has a card in their pocket.鈥
Some U.S. states have made it illegal for merchants to prohibit cash, but in Canada, any seller has the right to refuse any method of payment.
鈥淗ow people pay for a good or service (by cash, credit card, or in some other manner) is a matter of private agreement between the buyer and the seller, and must be acceptable to both,鈥 Amelie Ferron-Craig, a spokesperson at the Bank of Canada, told CTVNews.ca by email.
since the pandemic took hold, saying doing otherwise 鈥渨ill put an undue burden on those who depend on cash and have limited payment options.鈥
On the flip side, Madge at Visa says merchants who don鈥檛 accept digital payments are missing out on the growing segment of Canadians who simply don鈥檛 carry cash, and usually spend more when they shop.
鈥淭here is typically a seven per cent increase in basket size when people are paying digitally.鈥
But Maurer argues there is a large cost for small, cash-only businesses in digital point-of-sale devices and paying transaction fees.
He thinks cash has been stigmatized as a source of spread of this virus or other germs, even though plastic cards and payment terminals are probably greater risks than bank notes.
鈥淚 worry that spills over into thinking of those who use money as being dirty. Some already associate those dealing in cash with criminality, that if you live in a cash economy, you must be a drug dealer or something.鈥
In his book 鈥淭he Curse of Cash,鈥 Harvard professor and former chief economist of the International Monetary Fund Kenneth Rogoff argues that eliminating $50 and $100 bills would undermine counterfeiting, money laundering, terrorist financing, human trafficking and tax evasion.
鈥楢 TIPPING POINT鈥
The U.S. won鈥檛 be going cashless any time soon, says Maurer, but countries with lower levels of economic inequality, more social cohesion, and a greater trust in government and civic institutions 鈥 such as Sweden and Canada, says Maurer 鈥 may be more suited to an economy without bills and coins.
Sweden has long been the poster-nation for a cashless society, by some estimates as soon as 2023. It鈥檚 so far down that road that many bank branches are cashless and thousands of Swedes even went into the sci-fi realm by getting microchips implanted in their hands that allow payments with a swipe of the hand.
Innovation is ramping up in Canada, too.
Experts say what are called real-time rail payment systems will allow for a future in which you don鈥檛 check out at the grocery store, because you鈥檝e been paying for each chosen item as you鈥檝e shopped. You could order and pay for your meal at a food truck by tapping your phone to a code on a menu.
Vancouver is among a number of cities allowing riders to tap on and off trains, buses and ferries with their credit card or mobile wallet. It鈥檚 more convenient for all, says Madge, but especially for out-of-town visitors who don鈥檛 need or want a transit pass.
Siromani at RBC says in 18 to 24 months, Canadians will be able to instantly send money to each other using QR codes scanned on mobile devices and that invoicing will be built into the Interac e-transfer platform.
And Canada鈥檚 central bank is working with counterparts around the world on .
A central bank digital currency would truly bring cash into the electronic world, deputy bank governor . But he said that 鈥渢here is not a compelling case鈥 to go digital at this time.
Lane outlined two scenarios that would convince the Bank of Canada that it鈥檚 time for a centralized digital currency: if a 鈥渢ipping point鈥 was reached where cash could no longer be used for a 鈥渟ufficiently wide range of transactions鈥 and if there was widespread use of private digital currencies, that would 鈥渆rode competition and privacy and pose an unacceptable challenge to Canadian monetary sovereignty.鈥
The biggest player in that space is the yet-to-be-released Facebook Libra.
COVID-19 and its effect on cash use may have changed the bank鈥檚 outlook on a digital currency, say some economists, though no one knows for sure how much of the shift in spending habits brought on by the pandemic will be permanent.
鈥淧eople have been forced into it but they鈥檙e getting comfortable with the electronic world now,鈥 says Siromani. 鈥淚t鈥檚 a tipping point, there鈥檚 little doubt about it.鈥
But cash isn鈥檛 going away any time soon, he says, and consumers will continue to demand choice. His wife works in a bank branch where an elderly man comes in every week to withdraw $400. His visits have continued throughout the pandemic.
鈥淭here is a substantial segment of the population who love cash. That鈥檚 not going to change.鈥
Even a guy developing biometrics for credit cards doesn鈥檛 think cash is dead.
Andre Lovestam is CEO of Norwegian company Zwipe, which has developed a credit card that can only be used when its authenticated user holds a thumb over a chip embedded in the card.
Lovestam, who told an international payments industry webinar this week that Zwipe is expecting mass-market deployment in 2021, says no form of payment will become obsolete.
鈥淐ash is sticking, cheques are sticking 鈥 Solutions will live side by side.鈥
Edited by Senior Producer Mary Nersessian
