HN: Crisis leads to more cash payments among small firms

Photo: Tomáš Adamec / Czech Radio

The central bank says that the coronavirus crisis has caused Czechs to withdraw more cash from ATMs than usual, Hospodářské noviny reported Monday.

However, this is not only to increase the ready money in their pockets – it is also because small firms have been making more cash payments at a time of uncertainty, the business daily said.

Vojtěch Benda from the Czech National Bank’s board said that demand for cash shot up after Covid-19 first hit the Czech Republic in March.

Mr. Benda told Hospodářské noviny that at the same time as political leaders were advocating cashless payments, cash deliveries had been higher than usual for the period of the year.

According to data from the country’s high street banks, Czechs are now more likely to make payments by card, bank transfer or using some other cashless method than they were prior to the pandemic.

Photo: Yannick McCabe-Costa, Pixabay / CC0

While last year 57 percent of transactions were in cash, in the spring the percentage fell to 46 percent, an economist from Česká spořitelna told Hospodářské noviny.

However, now cash payments are just as popular as cashless ones.

Earlier in the year, many businesses encouraged cashless payments out of fear of the virus spreading via banknotes and coins. Some are now returning to this approach, Hospodářské noviny said.

However, central bank data suggests that people by no means turned their back on cash.

In the first half of April the volume of money in circulation jumped by CZK 55 billion out of a total of approximately CZK 630 billion. The increase for the whole of 2019 was only CZK 25.8 billion.

CNB board member Benda said this increase in the spring reflected the fact that many Czechs wished to have some cash reserves in case of some extraordinary development.

However, there was never any actual danger of a shortage of cash during the first wave of the pandemic, he told Hospodářské noviny.

Mr. Benda said not just individuals but companies in hard hit sectors such as hospitality, hotels and construction – may also have needed paper money.

Suppliers became increasingly worried about whether they would see what was owed to them and found cash a more reassuring method of payment, the central bank man told the newspaper.

The current restrictions pertaining to the second wave of the coronavirus are unlikely to spur the kind of demand for cash seen in the spring, said Mr. Benda.

Cash payments are chiefly demanded by small suppliers who have less ability to create reserves for a rainy day, he told Hospodářské noviny.