How the COVID-19 Pandemic Affected the Demand of Contactless Payments

The coronavirus is transmitted primarily through airborne droplets, and many public places have gone to great lengths to try to limit transmission. But some of these practices, like installing plastic barriers, may even make things worse, according to a recent New York Times article.

Sneeze guards can help protect a cashier in a grocery store from customers passing through, but using similar barriers in places like offices and classrooms can negatively impact airflow and create areas known as “dead zones,” where these germs may spread more rapidly, according to the report.

The importance of handwashing, social distancing, masking, and vaccinating to prevent the spread of COVID-19 has been confirmed by the CDC and WHO. And while cutting down on close interactions with others, transferring cash from hand to hand may not be ideal. But contactless payment may help alleviate some of those safety concerns.

One downside of contactless payments, though, is that they may lead to further reliance on credit cards, and people already struggling with how to pay down debt, may want to keep cash around. In any case, here’s a look at how the coronavirus has affected the demand for contactless payments over the past 18 months or so.

Cash is king no more

Cash already was on its way out pre-pandemic, but COVID has led some people to rely even more on other forms of payment. According to 2019 data from Experian, 1-in-10 millennials made purchases exclusively using their digital wallet.

According to a Travis Credit Union survey of 2,000 Americans last October, only 16% of respondents said they always carry cash. Millennials are the least likely generation to carry cash, as 40% of millennials said they carry cash “most or all of the time,” compared to 45% of Gen X and 59% of baby boomers.

But millennials aren’t alone in this tendency to move away from cash and toward contactless payments.

A 2020 Mastercard survey found that contactless payments via traditional checkout processes, like a pharmacy or grocery store, grew at twice the pace from February to March. Meanwhile, nearly 80% of respondents across generations cited “safety and cleanliness” as reasons behind the switch. Precedence Research projects that contactless payments will reach a volume of $4.6 trillion in the next six years, a roughly 77% increase from 2019.

A cash shortage

Last summer, the U.S. started to experience a coin shortage as consumers weren’t as likely to be out spending coins at places like laundromats, grocery stores, restaurants, and other retailers in the early months of the pandemic. The coin shortage highlighted that there isn’t an endless supply of cash.

Additionally, some retailers adopted card- or mobile-payment only policies to combat the cash flow issue, thus increasing contactless payments.

According to the Federal Reserve, levels of coin circulation still haven’t reached pre-pandemic levels, so they reinstated a cap in May 2021. This came after implementing a temporary cap in June 2020 on the orders depository institutions could place on coins to make sure coins were being equitably distributed.

While the pandemic seems to have increased people’s inclination to use contactless payments, it seems likely that people will continue to rely on those forms of payment in the future.