With more and more people using credit cards to make their daily purchases, with contactless payment systems such as Android Pay and Apple Pay becoming more widespread due to smartphone adoption, and with the rise of cryptocurrencies as a new method of payment, the future of payments looks more and more likely to be electronic. But just because electronic payments are becoming more widespread doesn’t mean that cash is going the way of the dodo – far from it. Cold, hard cash is alive and well and just as popular as ever.
A study from the Bank for International Settlements’ latest quarterly report indicated that in most countries both the use of cash and the use of electronic payments such as credit cards is increasing. The only exceptions to that are some Nordic countries, such as Sweden, where banks have been at the forefront of moving towards a cashless society.
Usage of credit and debit cards has more than doubled in many countries, with the average total purchase decreasing as credit card payment systems become more widespread. More and more people are using cards to pay for everyday purchases. But despite that, card use isn’t supplanting cash use.
The researchers pointed out that cash use has actually increased since the financial crisis. On the one hand, that could reflect some continued nervousness on the part of many individuals about the strength of the banking system, but on the other it also reflects the effects of the prevailing low interest rate environment.
In an era in which a bank savings account might pay 0.10% interest or less, there is really no difference between holding cash in a bank account versus stuffing money under your mattress. In many cases it may actually be cheaper to hold money at home versus having to go to the ATM every time you need money.
In fact, the BIS data shows that in many countries the demand for larger-denomination notes has far outstripped the demand for lower-denomination notes. That indicates that many people are saving cash and holding it as a store of value, socking away money at home for a rainy day rather than trusting that money to be left to the banking system.
Given the bank runs that took place during the financial crisis, that may not be such a bad idea. Despite all the incentives and nudges given to people to stop using cash, it doesn’t look like cash will be going away any time soon.
