COVID and digital payments
One more trend accelerated by COVID: the switch away from cash and towards digital payments. At the beginning it was the fear “of catching COVID through cash” but then as physical stores were shut down and with more and more online shops offering contactless delivery, the need for cash very quickly gave way to digital payments. Did the trend go too far? Yes, argues Claudio Grass who recounts a report from Reuters that revealed that the US Federal Reserve was quarantining dollars that it repatriated from Asia and so was South Korea’s central bank. The government forced banks in China to disinfect bills and keep them in a safe for up to fourteen days before putting them in circulation.
The COVID Crisis Supercharged the War on Cash
By: Claudio Grass – Mises Institute
The role of central banks
[T]he central bank can play the pivotal role as the operator of the underlying infrastructure, much as the town authorities operate the town market. It is the central bank that provides the public space through access to its settlement accounts. In that sense, the balance sheet of the central bank is a public space where the sellers of the payment services all interact.
The central bank is well placed to play this role, as it issues money (which is, after all, the unit of account in the economy), as well as ensuring finality of payments through settlement on the central bank’s balance sheet. Like the town market, the central bank can help safeguard this bustling payments marketplace, where the network effects can be channelled towards achieving a virtuous circle of greater participation, lower costs and better services.
Central banks and the new world of payments
By: Hyun Song Shin – BIS
Lockdowns and digital payments in emerging markets
In emerging markets and developing economies authorities have taken steps to encourage the use of digital payments in response to Covid-19. In this paper Nana Yaa Boakye-Adjei describes the different policy initiatives taken by these countries:
- Sub-Saharan Africa is where the vast majority of policy interventions have taken place, followed by the Middle East and North Africa and Latin America;
- In countries where financial inclusion is around 10% such policies have significantly increased the adoption of digital channels among those who otherwise wouldn’t access or use them;
- But Covid-19-related cyber crime and fraud have increased in a number of jurisdictions.
Covid-19: Boon and bane for digital payments and financial inclusion
Author: Nana Yaa Boakye-Adjei
From: BIS
