Economy

How COVID-19 Has Changed Payments — And Could Kill Cash

A woman using mobile payment in Ghent, Belgium.
A woman using mobile payment in Ghent, Belgium.
Anne Sophie Goninet

The coronavirus outbreak has changed our relationship with work, health and… cash. The fear of contamination while handling coins and banknotes has accelerated a trend that had already been growing for years: contactless payments. Both consumers and businesses that may have been previously reluctant to go digital are changing their preferred payment methods. Does this mean the end of cash?

Digital payments on the rise: The adoption of digital and contactless payments has seen significant growth all around the world, be it through websites, mobile phones or credit cards.

  • In India, a poll conducted by Mastercard on digital payments revealed a 19% increase in the actual contactless cards issued in the first quarter of 2020, the Financial Express reports. The corporation also found that contactless transactions were particularly high for purchases below $10 and in four types of establishments (supermarkets, restaurants, bars and gas stations), which registered more than 1 million contactless transactions each month at the beginning of 2020.

  • Malaysia is also one of the fastest-growing countries in Asia Pacific to adopt contactless payments, according to The Malaysian Reserve. A study conducted by Visa revealed three out of five Malaysians prefer using digital payments compared to cash before the pandemic while another report by Mastercard found that 40% of Malaysian consumers have reported increasing the use of their mobile and digital wallets.

  • With businesses closed during the lockdown and many consumers feeling uncomfortable returning to stores post-confinement, online shopping has been soaring in many countries. According to Adobe's Digital Economy Index, which analyzes global digital commerce trends, online shopping reached $66.3 billion in July 2020 — a 55% increase compared to last year. Several e-commerce companies reported very high figures: Amazon's net income increased to $5.2 billion in the second quarter of 2020, compared with $2.6 billion last year, while Argentina's MercadoLibre registered revenues that increased 123% compared with 2019. In China, the online sale of physical goods grew by 25% in June 2020 while e-commerce accounted for a quarter of the country's total retail for the same period, with categories such as cosmetics and beverages on the rise.

Multiplying cashless options: Governments and private companies alike are encouraging contactless transactions by offering new payment options for consumers in various sectors.

  • The French government, in collaboration with Visa and MasterCard, raised the contactless transaction limit of credit cards from €30 to €50 on May 11th as the country started to ease lockdown measures. French citizens immediately took advantage of the new measure: Les Echos reports that a mere three days later, three million transactions between €30 to €50 were made — raising contactless transactions by an additional 15%.

Someone using a credit card on a white POS machine. — Photo: Clay Banks/Unsplash

  • Shops and businesses are also adapting to the new trend. In the United States, a National Retail Federation survey found that 58% of retailer respondents were now accepting contactless cards, an increase from 40% compared with 2019. Big retail companies such as Walmart have expanded contactless options for both payment and delivery, such as using QR codes for purchases via smartphone apps.

  • Some companies are also trying to offer completely new contactless solutions. KEB Hana Bank, one of the biggest commercial banks in South Korea, has partnered with the Korea Expressway Corporation to create a blockchain-based toll payment system across the country's highways. D Daily reports that the project, expected to be launched before the end of 2020, will help remove cash and credit card payments as motorists use their smartphone banking apps to pay for tolls. Both parties stated that the pandemic is helped spur them to create this new system.

  • In the Philippines, GCash, the country's largest mobile wallet app with 20 million registered users, is working with the government to equip taxis with scan-to-pay systems where users pay via QR codes from their smartphones, Nikkei Asia Review reports. In parallel, the government has been promoting digital currency through an online payment platform for administrative services called EGov Pay. By the end of March, the country had increased the number of government institutions that accept digital payment via the platform by 56%.

No more cash? As more and more payments are made digitally, cash seems to be in short supply in some countries — but maybe not for reasons you would think.

  • It is now common in the United States to see signs in restaurants and stores that ask customers to pay with credit cards or exact change. Why? Because the country is facing a national coin shortage this summer. This is an unusual result of the economic slowdown caused by the pandemic. The Federal Reserve explained in a statement that the shortage was caused by a "slower pace of circulation" of coins during the lockdown. As businesses reopen across the U.S., demand for coins exceeds the available supply — to the point where banks are asking customers to bring spare change, USA Today reports. To address these disruptions, the Federal Reserve has established a "Coin Task Force," which recently released a first set of recommendations.

  • Further north, a similar deficit has arisen from a resistance to the cashless trend. The Bank of Canada is currently facing a shortage of $50 bills due to citizens hoarding cash during the pandemic. A report indicates that the increase in consumer demand for banknotes was "significant," with withdrawals concentrated in major cities such as Toronto and Montreal. The bank registered a spike in demand for all bank notes in April and May compared with the past five years. However, the hoarders may not be able to spend their banknotes at all as many businesses ask customers to avoid cash payments while others even refuse them.

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Geopolitics

Why This Sudan Coup Is Different

The military has seized control in one of Africa's largest countries, which until recently had made significant progress towards transitioning to democracy after years of strongman rule. But the people, and international community, may not be willing to turn back.

Smoke rises Monday over the Sudanese capital of Khartoum

Xinhua via ZUMA
David E. Kiwuwa

This week the head of Sudan's Sovereign Council, General Abdel Fattah El Burhan, declared the dissolution of the transitional council, which has been in place since the overthrow of former president Omar el-Bashir in 2019. He also disbanded all the structures that had been set up as part of the transitional roadmap, and decreed a state of emergency.

In essence, he staged a palace coup against the transitional authority he chaired.


The general's actions, which included the arrest of Prime Minister Abdalla Hamdok, are a culmination of a long period of tension between the civilian and military wings of the council.

A popular uprising may be inevitable

The tensions were punctuated by an alleged attempted coup only weeks earlier. The days leading to the palace coup were marked by street protests for and against the military. Does this mark the end of the transition as envisaged by the protest movement?

Their ability to confront counter revolutionary forces cannot be underestimated.

The popular uprising against Bashir's government was led by the Sudan Professional Association. It ushered in the political transitional union of civilians and the military establishment. The interim arrangement was to lead to a return to civilian rule.

But this cohabitation was tenuous from the start, given the oversized role of the military in the transition. Moreover, the military appeared to be reluctant to see the civilian leadership as an equal partner in shepherding through the transition.

Nevertheless, until recently there had been progress towards creating the institutional architecture for the transition. Despite the challenges and notable tension between the signatories to the accord, it was never evident that the dysfunction was so great as to herald the collapse of the transitional authority.

For now, the transition might be disrupted and in fact temporarily upended. But the lesson from Sudan is never to count the masses out of the equation. Their ability to mobilize and confront counter revolutionary forces cannot be underestimated.

Power sharing

The transitional pact itself had been anchored by eight arduously negotiated protocols. These included regional autonomy, integration of the national army, revenue sharing and repatriation of internal refugees. There was also an agreement to share out positions in national political institutions, such as the legislative and executive branch.

Progress towards these goals was at different stages of implementation. More substantive progress was expected to follow after the end of the transition. This was due in 2022 when the chair of the sovereignty council handed over to a civilian leader. This military intervention is clearly self-serving and an opportunistic power grab.

A promised to civilian rule in July 2023 through national elections.

In November, the rotational chairmanship of the transitional council was to be passed from the military to the civilian wing of the council. That meant the military would cede strong leverage to the civilians. Instead, with the coup afoot, Burhan has announced both a dissolution of the council as well as the dismissal of provincial governors. He has unilaterally promised return to civilian rule in July 2023 through national elections.

Prior to this, the military had been systematically challenging the pre-eminence of the civilian authority. It undermined them and publicly berated them for governmental failures and weaknesses. For the last few months there has been a deliberate attempt to sharply criticize the civilian council as riddled with divisions, incompetent and undermining state stability.

File photo shows Sudan's Prime Minister Abdalla Hamdok in August 2020

Mohamed Khidir/Xinhua via ZUMA

Generals in suits

Since the revolution against Bashir's government, the military have fancied themselves as generals in suits. They have continued to wield enough power to almost run a parallel government in tension with the prime minister. This was evident when the military continued to have the say on security and foreign affairs.

For their part, civilian officials concentrated on rejuvenating the economy and mobilizing international support for the transitional council.

This didn't stop the military from accusing the civilian leadership of failing to resuscitate the country's ailing economy. True, the economy has continued to struggle from high inflation, low industrial output and dwindling foreign direct investment. As in all economies, conditions have been exacerbated by the effects of COVID-19.

Sudan's weakened economy is, however, not sufficient reason for the military intervention. Clearly this is merely an excuse.

Demands of the revolution

The success or failure of this coup will rest on a number of factors.

First is the ability of the military to use force. This includes potential violent confrontation with the counter-coup forces. This will dictate the capacity of the military to change the terms of the transition.

Second is whether the military can harness popular public support in the same way that the Guinean or Egyptian militaries did. This appears to be a tall order, given that popular support appears to be far less forthcoming.

The international community's appetite for military coups is wearing thin.

Third, the ability of the Sudanese masses to mobilize against military authorities cannot be overlooked. Massive nationwide street protests and defiance campaigns underpinned by underground organizational capabilities brought down governments in 1964, 1985 and 2019. They could once again present a stern test to the military.

Finally, the international community's appetite for military coups is wearing thin. The ability of the military to overcome pressure from regional and international actors to return to the status quo could be decisive, given the international support needed to prop up the crippled economy.

The Sudanese population may have been growing frustrated with its civilian authority's ability to deliver on the demands of the revolution. But it is also true that another coup to reinstate military rule is not something the protesters believe would address the challenges they were facing.

Sudan has needed and will require compromise and principled political goodwill to realise a difficult transition. This will entail setbacks but undoubtedly military intervention in whatever guise is monumentally counterproductive to the aspirations of the protest movement.

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David E. Kiwuwa is Associate Professor of International Studies at University of Nottingham

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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