Will the coronavirus kill cash?

Cashless society? Is cash really heading to the graveyard as a payment method in Australia? I don’t buy it just yet, and here’s why!

| More on:
australian $10 note with coronavirus mask

Image source: Getty Images

The 2020 coronavirus pandemic has brought a lot of sudden and sharp changes to the way we used to live our lives. Many of these changes, such as social distancing, will probably turn out to be mostly temporary, once the pandemic passes into history. But many other trends, such as more of us working from home and using the internet to do our shopping will probably be here to stay. One of the most profound trends we have seen is the move away from cash payments towards electronic, ‘cashless’ payment methods.

According to reporting from the ABC, cash now makes up less than 25% of the total proportion of payments in the economy, down from nearly 40% just 4 years ago.

No wonder shares of companies providing cashless payment solutions are among some of the biggest winners over the past few months. That’s got to be why Afterpay Ltd (ASX: APT) is up more than 670% since 23 March. Or why Pushpay Holdings Ltd (ASX: PPH) is up nearly 150% and Zip Co Ltd (ASX: Z1P) up nearly 390%. It’s a similar story with United States payments shares like PayPal, Visa, Mastercard and Square.

Cash is as good as dead, right?

The death of cash? Not so fast

According to separate reporting in the Australian Financial Review (AFR), the reports of the death of cash might be greatly exaggerated. According to the AFR, the levels of cash in circulation is actually on the rise across many advanced economies. Apparently, there are 8% more banknotes in circulation across the US today than there were in 2019. It’s a similar situation in Europe. In fact, the AFR states that “of the largest economies, only China has begun to see an absolute decline in the ratio of physical currency to GDP.”

The ABC report backs this up, noting that in Australia, the proportion of $50 and $100 notes in circulation has ballooned since the 1980s. The report tells us that there was around $10 billion worth of $50 notes in circulation across the Australian economy in the year 2000. Today, in ‘cashless’ 2020, the number is close to $80 billion. It also notes that there are still around 500,000 bank accounts in Australia that are not tied to a debit card, instead linked to cash-only passbook accounts.

My conclusion? Cash isn’t going anywhere anytime soon.

Foolish takeaway

I certainly think cash will continue to decline as a major form of day-to-day payments. But I’m not betting the house that cash will be going extinct anytime soon. So by all means, invest in ASX payments shares that facilitate cashless payments. But don’t count on the death of cash just yet.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News