The Comfort of Cash in a Time of Coronavirus
At Sunshine Ace in Naples, Florida, signs have been put up to encourage contactless payments during the coronavirus pandemic. Employees at the chain of hardware stores constantly wipe down the touch pads of debit card readers, and at each checkout counter the chain has installed plexiglas shields. When Michael Wynn, Sunshine’s third-generation owner, checked his books for June, payments in cash had dropped slightly since the start of the pandemic. It looked like another sign of the steady demise of cash.
Yet that is not the whole story. The resilience of paper money — again illustrated during the pandemic — means the hardware chain and many other retailers like it cannot plan to get rid of bills and coins entirely. Customers at Ace’s stores in poorer parts of southwestern Florida still like to pay for paint and hammers with cash. At Ace’s Port Charlotte branch, cash was 19.3 per cent of sales in June, compared with an average of 13.3 per cent for all its stores. Parts of Florida, which on Tuesday reported 133 coronavirus deaths — a one-day record for the state, have returned to lockdown. But Sunshine Ace has stayed open.
Mr Wynn’s customers are showing what financiers would call a higher “liquidity preference” — they’re borrowing what they can and holding on to their cash in a time of uncertainty. Early in the pandemic, he says, customers also loaded up on propane and water, the way they would if preparing for one of Florida’s frequent hurricanes. As storms approach, the state tells its citizens to have cash available.
“I think it’s a form of comfort,” says Mr Wynn, “because those are typically things we’ve done for our families — like taking out cash.”
Retail surveys and data from the Federal Reserve support Mr Wynn’s theory. Cash use at the till has declined slightly during the pandemic, as consumers accelerate the shift to electronic payments. But just like the period before a natural disaster, there has been a spike in cash withdrawals in the US.
Read the full story by Brendan Greeley: “The comfort of cash in a time of coronavirus” (15 July 2020)
Photo credit: Denis Torkhov via iStock
Note: This post was updated on July 27, 2021 to direct readers to FT.com for the full story.
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.