10 Dec 2020 · 3 min read

Cash Still a Top Hedge Pick, but Digital Winning Payments War – Bank Strategist

Cash has not lost its luster yet, as the global public still sees it as a vital hedge in times of crisis, stated a Deutsche Bank strategist – but the coronavirus pandemic has accelerated the rate at which people around the world are trashing cash in favor of digital forms of payment.

Source: Adobe/JMB

In a session entitled “The Future of Payments” held at the Paris Blockchain Week Summit, which concludes today, Marion Laboure, a Macro Strategist at Deutsche Bank, noted that bank research has shown that the COVID-19 crisis has accelerated the adoption of contact-free forms of payment. She added that this was particularly true in Western Europe.

Laboure stated that there has been a “remarkable increase in digital payments” of late, and that the e-commerce world had experienced the “rebirth of internet mass-market consumer.”

However, when it comes to assets the public trusts, notes and coins are king, the strategist noted, adding that large companies are continuing to build up cash reserves.

She said,

“People are withdrawing cash as it’s seen as safe haven, especially during times of crisis.”

But even if people do instinctively want to hoard cash in times of economic trouble, they appear loathe to actually spend it.

Laboure pointed to bank research figures that showed Western Europe had experienced a 15%-20% rise in online shopping, with digital and online payments growing by up to 50% in areas such as the UK, where retailers such as Amazon have been almost unable to cope with the uptick in demand.

And the Deutsche Bank expert added that the COVID-19 crisis had forced the bank to adjust its forecast of the rise in digital payments upwards by 5%.

Laboure and Danelle Dixon, the CEO and Executive Director at the Stellar Development Foundation, also claimed that central bank digital currencies (CBDCs) could help drive up digital pay adoption rates, although the former said that in her own personal opinion a digital euro would not surface in 2021.

Laboure claimed that low interest rates meant that there was little incentive to streamline a CBDC project in the EU, adding that she believed,

“If it happens, it won’t be next year.”

But not all attendees thought CBDCs were a worthwhile project.

Uldis Tēraudkalns, the CEO of the Latvia-based fintech firm Globitex, stated that he did not “see any value added by a CBDC on top of what the euro currently provides” as the difference between transaction speeds would likely be relatively minimal for most users – and solutions like Apple Pay and Google Pay have already all but eliminated the need for cards in some areas.

He said,

“With all that already in place, I don’t see what CBDCs bring to the table and I am more concerned with their possible risks. […] There are a lot of checks and balances [built into the current system]. There has been increased surveillance from regulators, but it’s still not absolute.”

Tēraudkalns opined that a “blockchain-based solution controlled by a single entity,” namely a central bank, would make the aforementioned “checks and balances disappear.”

Instead, he suggested that stablecoins could provide a more positive solution for governments – if they were successfully regulated.

He concluded,

“Stablecoins would solve the cross-border payments issue. CBDCs will probably merge together with stablecoins. The current system works well, but, if you don’t like that, there’s bitcoin (BTC).”

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Learn more:
Crypto in 2021: Bitcoin To Ride The Same Wave Of Macroeconomic Problems
Fiat Will Be a Passing Fad In the History of Money - Deutsche Bank Strategist
Coronavirus Crisis Driving US Investors to Bitcoin, Survey Finds
Warning: Physical Cash Will Be Mostly Gone by the End of the Decade
Going Cashless Isn't Straightforward. Ask Sweden, or Zimbabwe