COVID-19 pandemic increases the divide between cash and cashless payment users in Europe

This paper investigates the way in which the COVID-19 pandemic has changed an important aspect of everyday life, viz. how people make payments. The empirical study is based on a survey of over 5,000 respondents from 22 European countries. It shows that consumers who had been making cashless payments prior to the outbreak of the pandemic have been even more likely to do so since it broke out. On the other hand, the consumers who had mostly been paying in cash have often continued to do so. Results indicate that the usage of banking and payment innovations proved to be the catalyst leading to the growth of cashless payment usage. The divide between those who pay in cash and those who do not, therefore, seems to have widened during the pandemic. We found that the probability of more frequent cashless payments as a result of the pandemic differs considerably between countries and therefore depends on local conditions. The results indicate that the pandemic has exacerbated major financial inclusion issues and that this needs to be addressed by policymakers, but also that further analysis of factors differentiating usage of cash and the cashless instrument is needed.