Can you catch COVID-19 from cash? Aussies aren't taking the chance
COVID-19 has rewritten life in immeasurable ways, including the way we view and use cash.
The use of digital payments has skyrocketed in the past months, driven by fear of virus transmission via cash.
Analysis from Commonwealth Bank has found that digital wallet users spent $1 billion in March, an increase of 17% from February.
Kate Crous, executive general manager of everyday banking at CBA says "the growth in the number of contactless purchases has been increasing since the introduction of Apple Pay last year, however it's now evident that even more people regard it as a safe and secure way to pay in this environment".
While it may not appear this way, reduced daily handling of cash and increased cash hoarding are not mutually exclusive.
"The younger generation has been moving towards digital currencies for a long time now," says behavioural economist David Savage. "That's nothing new."
Using digital payment methods poses a debt risk. With cash, you open your wallet and can see your budget in front of your face. Digital payments, especially digital wallets, is divorced from this sensation.
"We don't keep a close track on our money if we use digital wallets," says Savage.
At the same time, ironically, people are hoarding cash.
According to a report from the Reserve Bank of Australia (RBA), "Over-the-counter withdrawals of cash from banks were elevated over the second half of March as some customers with large balances sought to hold precautionary funds."
"This included a small number of customers making very large withdrawals (more than $100,000, and in some cases into the millions of dollars)," the RBA says.
This is a standard behavioural response during crises.
"People who are pulling cash, especially large amounts of cash, they're thinking further down the road - 18 months," says Savage.
"If we see a depression, bank rates will go through the floor. Holding cash at banks will be an expensive exercise."
The move to cash risks igniting a broader 'run on the bank', which could lead to empty ATMs and a frozen economy.
"It starts becoming a self-fulfilling prophecy," he says.
"It's the same as the toilet paper crisis - it happened because people thought it was going to happen.
"Most people don't think of the knock-on effects of what they do. They'll get in first and it will work out for them alone, but once you start aggregating with everyone, the problem turns the other way."
As with the toilet paper, it's a case of monkey see, monkey do.
Savage suggests that people often take their cues from the rich. If the rich are withdrawing cash, they think it's in their best interest to do the same.
Whether this situation represents a structural or temporary change is contingent on the time it takes to control the virus.