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This magazine → Cash after COVID

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Photo by Michelle Spolen

In April, a friend and I met for smoothies at a cafe before going for a containment walk.

We each ordered and I pulled out my debit card to pay. “Sorry, cash only,” said the woman behind the counter. I stared at her, then at my friend. “I have no cash,” I said; my friend confirmed that she neither. We apologized to the woman, then headed to another cafe that was taking cards.

Even before the pandemic, Canada tended to become a cashless society: cash transactions have been steadily declining since 2011, when contactless debit and credit (i.e. tap) gained popularity . While two-thirds of Canadians reported using contactless credit or debit in 2018, 90% of unbanked people (that is, those unrelated to a bank) report using cash. cash.

Since the start of the pandemic, many companies have started banning cash transactions over concerns that they may be a nest for the COVID-19 virus. A new report from FIS Global, an international FinTech company that uses technology to better engage in financial markets, says that since the start of the COVID-19 pandemic, cash transactions have fallen by more than half . It also states that FIS Global expects cash to only be used for 4% of in-store payments by 2024.

It seems that very few people in the bank that I know use cash these days. The friend I was walking with said she hadn’t withdrawn money from an ATM since March 2020, before the pandemic – something I realized was true for me too, after thinking about it.

With what appears to be the imminent death of cash, accelerated by the COVID-19 pandemic, I wonder if the things that we give cash to, primarily small businesses and between them, will also disappear. As some of us adjust, who could be left behind?

The history of the widespread use of cash is relatively short. Standardized currency was first implemented in parts of the world during the Axial Age, 800-300 BCE, and then again after periods of disuse in East Asia and Europe during the Fifteenth century. Before his employment, people used what was relatively abundant around them as a substitute, like metal nails or cod, or accumulated personal credits with each other’s businesses.

The second attempt to introduce a standardized mass currency coincided with the advent of capitalism in the 16th century. Adam Smith, a prominent eighteenth-century economist, believed that it would be advantageous for a country to standardize day-to-day transactions and abandon the practice of mercantilism, which involved the crown accumulating so many ingots (gold or silver, before hit) as best he could.

As the colonial exploits of Spain and Portugal brought massive amounts of money into the European economy, it became more possible to regulate the currency and remunerate everyone with the same reward. Around the same time, standardized paper money, backed by bullion, became more common and was another means of regulating transactions.

In the 18th and 19th centuries, central banks increasingly took control of the printing of paper money.
In Canada, Indigenous peoples had longstanding trading practices, using items made of copper, precious metals, and furs as the basis of a currency. Before a standardized Canadian currency ended up being more prevalent in the decades following Confederation.

The many types of currencies meant that money had many forms until the 20th century. Money then became fairly standardized, with cash as the primary method of payment, until two new forms of payment were introduced in Canada: credit in 1968 and debit in 1988. It took a certain amount of time. time for debit to spread, and it wasn’t until 1994, it was offered by all banks and accepted by retailers in all provinces.
In 2009, however, cash only made up 54% of transactions, and that number fell to 33% in 2017.

The question then is, who uses cash these days? In the United States, 55% of small businesses do not accept credit cards. In a 2008 study in Canada, 93 percent of businesses accepted debit, while 92 percent accepted credit and all cash accepted.

Many small businesses prefer cash because they don’t incur a processing fee. Salon SLiJ, a long-standing hair salon in Montreal, previously accepted cash and wire transfers, but began accepting only wire transfers during the waves of the COVID-19 pandemic. Oleg, the salon director, who prefers to use only his first name, says that, like many salons during the pandemic, “our sales are down by more than fifty percent.”

Nikhil Tangirala, a city planner who lives in Montreal, says he stopped using cash during the pandemic for hygiene reasons. “I don’t use a lot of money anyway, but I definitely started using less during COVID,” he says. “I stopped going to my local convenience store,” which predominates in cash and accepts debits at additional costs, he adds.

Beyond small businesses, those who primarily use cash tend to be at the lower end of the socio-economic ladder. In Canada, three percent of Canadians, the equivalent of over one million people, are unbanked and 15 percent of Canadians, or nearly five million people, are underbanked, which means that ‘They have no or limited access to credit and debit for various reasons, such as having a bad credit rating or living in an area underserved by banks. As a result, proportionally to the unbanked or underbanked, 15% of Canadians report being heavy users of cash.

Étienne, who prefers to speak only by his first name, is an unbanked person living in Montreal who is also homeless. His main income is obtained by asking people on the street for money. “It was hard, it was really hard,” says Étienne, referring to his income during the pandemic. “It’s been tough now too, but it’s been better since COVID… More and more people are using debit cards now instead of cash… they say ‘sorry, I only have debit’. “

In 2019, cash transactions represented 21% of total transaction volume, and 80% of Canadians reported making at least one cash transaction per week. Of those 80 percent, more than half said they gave people money (rather than using it for purchases) during the week.

As cash increasingly disappears, a new player in the game, cryptocurrency, has entered circulation, digital coin by digital coin. Cryptocurrencies, such as Bitcoin, have no physical form and can only be used for online transactions, which are handled in a decentralized manner by brokers who cash each transaction. Cryptocurrencies usually have finite amounts of money, which ensures that the currency does not lose value. This differs from physical currencies, which are protected by interest rates.

The latest figures available on the use of cryptocurrency in Canada are from 2019, when it was reported that nearly four percent of Canadians used bitcoin and nearly one percent used the second-largest cryptocurrency. more popular, Ethereum. In 2016, 64% of Canadians knew about Bitcoin, and that percentage rose to 85% in 2017.

As the circulation of cryptocurrencies increases, increasing pressure on central banks to create their own digital currencies to facilitate transactions, in their current private form, they present significant barriers to access. On the one hand, the limited amount of cryptocurrencies means that they are very expensive; at the time of writing, for example, one bitcoin equals C $ 47,784. Another major problem is that cryptocurrency transactions are expensive, with bitcoin transactions costing almost $ 60 in April 2021.

Cryptocurrencies are also digital-only currencies, which means that they are again only for those who choose or are able to process electronic payments. Even though there were nearly 900 Bitcoin ATMs in Canada in 2020, these only serve people who want to exchange physical currency for bitcoin, not the other way around.

Professor Matt Tiessen is studying digital economics at Ryerson University. He believes cryptocurrencies are on the rise because they can potentially move money faster. “Money likes to move,” he says, “and the liquidity of cryptocurrencies allows it.” At the same time, the cost and means of processing private cryptocurrencies should present significant barriers to access. “It’s prohibitive,” he says.
Tiessen is wary, however, of the concept of a central bank-produced digital currency, believing it could create significant and new annexations of economic control. “[A national cryptocurrency] would create a system of surveillance and power, ”says Tiessen. “The money is there. “

“Part of the attraction to the government in creating a national cryptocurrency would be that it could be quickly distributed and then expire, ensuring that it is always spent.” (This happens as he talks about a potential for universal basic income issued by the government.) A national digital currency could then bypass some of the barriers to accessing private cryptocurrencies, but could also reduce autonomy. . “It could limit your financial freedom,” says Tiessen.

As we slowly move from the COVID-19 pandemic to a version of life that involves touching, hugging, filtering between stores and homes, and feeling close to the people and things that hold us back at heart, where will we go with the money? Before the loonie, we had many different forms of money, but these had widespread circulation within localized communities and, within those communities, had relative accessibility, despite the general inequality.

The contactless faucet could work in the same vein of magic as buying physical goods with invisible currency, or “exploiting” the intangible premium. Money, however, connects us to a stream, a common denominator, of which we are all a part.