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COVID-19 | What if a digital virus hits our payment systems?


Just like the SARS-CoV-2 virus has infected and paralysed human lives, a computer virus can disrupt and paralyse the digital system.

Reserve Bank of India (RBI) Governor Shaktikanta Das ended his March Monetary Policy statement saying “I leave you with this comforting thought. Stay clean. Stay safe. Go digital.” Even in its earlier measures for COVID-19, the RBI specified the need to advance digital transactions.

On March 16, the RBI’s ‘COVID-19- Operational and Business Continuity Measures’ specified banks to ‘Encourage their customers to use digital banking facilities as far as possible.’ The RBI released a separate advisory on the same day saying all digital payments are functional and encouraged banks/customers to use them.
One can understand that the RBI wants to push digital transactions, but to do this during a pandemic is odd. Just like the SARS-CoV-2 virus has infected and paralysed human lives, a computer virus can disrupt and paralyse the digital system.

During the initial days of the virus, there were reports that currency notes and coins could be the carrier of the virus strain, and thus one should not use it. There were news that the Chinese actually took back cash in virus-affected regions and destroyed the same.

Now whether currency notes and coins are a carrier of virus or not has led to different reactions from central banks. Sweden’s Riksbank has released a statement saying there is no evidence that banknotes spread COVID-19, and one could just use them without fear. In South Africa, some people created a scam and reached out to households saying the South African central bank has decided to call back banknotes and people should hand the notes in the household to the (scam) team. Thankfully, the South African central bank released a notice saying that there was no such call back. The RBI has not made any statement on whether it is safe to use banknotes.

In some countries there have been calls for the central bank to issue polymer notes, which do not carry any such hazard. Some articles have stated that polymer notes are not risk-free.
Even before the COVID-19 outbreak, there were concerns that banknotes carry bacteria and viruses as they exchange many hands during transactions. The best example was seen during demonetisation where some of the branch managers suffered health problems due to old demonetised banknotes. This led to even more calls for switching to digital payments as soon as possible.

This is fine, but shouldn’t the central banks and governments be worried about a virus attack on digital payments? The millennials and even those before them are in fact more familiar with the computer viruses than biological virus. We have just seen how a virus can totally disrupt human life, and it can so easily do the same for digital payments.

In all this discussion on pushing digital payments, the central banks and governments have barely cared to analyse the impact of a possible virus attack on digital payments. These are still seen as narrow tail risks, but, in reality, they are fat tailed risks. The risks posed by a deadly computer virus are really large and could flatten an entire digital payment system. As the entire banking system becomes increasingly digital, the risks are limited not just to payments, but extend to savings as well. In such an event, one could see several people losing their lifetime’s savings in a flash.

This is the time where the financial leaders should take a step back and reassess the risks of digital transactions. There are conspiracy theories surrounding COVID-19’s origin, but, in payments systems we do not even need such theories because it’s a known fact that there are people out there trying to hack ATMs, private/bank payment systems, etc. Pop culture, from movies to songs, is replete with references to such acts.

Given all this, it’s highly ironical that during a pandemic caused by a biological virus, the authorities are encouraging people to opt for a solution which itself is so prone to a (computer) virus attack. Human beings are full of hubris when it comes to ‘innovations’ which create a chain of intended and unintended consequences. When these unintended consequences (which are known in advance) break out and harm the public at large, the purveyors of these ideas act surprised.
Ideally, we should try and find a healthy balance between the physical and digital payment world. We have seen how physical cash comes handy in regions which suffered from natural disasters which disrupted digital payments. Digital payments pose other problems such as lack of privacy and anonymity. Physical cash has its own problems, but it has served humanity for long despite multiple epidemics and flus and will outlast the COVID-19 outbreak as well. Whether cash will outlast the attack from digital pushers is to be seen.

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