There’s been a lot of talk recently about cashless societies, how cash use is declining and that digital currencies are the way forward. This is nothing new.
And it’s true that non-cash transactions are growing—last year, they numbered around 539 billion and are widely expected to pass 1 trillion in the coming years. But cash in circulation is also on an upward trend, growing from 4 percent to 7 percent over the last five years; indeed, it grew faster than GDP in 40 countries who make up 75 percent of the world’s GDP.
The story of cash usage across the world is a little different. Some societies are highly dependent on cash for everyday transactions, while others have prevalent digital economies. For instance, Sweden leads the way with cashless payments, with only 6 percent of household payments involving cash in 2019. China is also very similar with high prevalence of mobile payment technologies like Alipay and WeChat Pay. One study showed 98% of people with smartphones in urban areas there use their devices for mobile payments.
Elsewhere in the world, cash usage remains very strong. Switzerland, for example, has one of the highest numbers of ATMs. Germany is a largely cash-led society, with restaurant and groceries paid in cash twice as often as the European average. And in India, cash in circulation rose 17 percent in 2017 and 2018.
Globally, people withdraw over $12.6 trillion USD from the world's 3.1 million ATMs every year. That’s the equivalent of more than $400,000 in cash withdrawals every single second.
And then there’s the impact of the pandemic, which is shaking up all the previous trends, including cash usage. Lockdowns have seen some bank branches and ATMs close. Spending fell as non-grocery stores closed, while online spending increased as people stayed at home.
According to RBR, cash transaction volumes at ATMs was likely to be down 15 percent in 2019 but is anticipated to recover – and is already in many countries. Indeed, it’s estimated that people will make 79 billion cash withdrawals in 2020. By 2021, the number of cash withdrawals are estimated at 90 billion, in line with previous years.
Related: Cash and ATM usage trends during COVID-19
As the pandemic started to affect countries, there was an increase in the number of cash withdrawals as people placed more confidence in—and hoarded—cash. Indeed, Eurozone citizens hoarded banknotes to such a degree that the value of banknotes in circulation has increased by the largest amount since the 2008 financial crisis. In the four weeks up to April 10, the value of Euro banknotes distributed to individuals and businesses rose by €41.2bn to €1.33tn.
As people stayed at home, transaction levels fell, but the value of each transaction went up as people used the ATM less frequently but took out more money. The United Kingdom, for instance, saw transactions fall by 60 percent—although 116 million cash withdrawals are still being made monthly with over £6 billion GBP withdrawn. In some countries, such as India, mobile ATMs emerged to enable people to access their cash without travelling to branches.
Across the world, financial institutions have innovated to enable business continuity and provide access to banking services for customers, despite lockdown and social distancing. We’ve seen FIs pivot their operations, whether enabling their ATMs to become Interactive Teller Machines, shifting their call center staff to home environments or enabling curbside collections. What’s more, we’ve seen increased digital banking engagement as customers explored their banking mobile app for the first time or used it more extensively than ever before.
Related: Can mobile bank branches support communities during COVID-19?
Indeed, we’ve seen digital banking being used more than ever before: our NCR Digital Banking customers have seen more than 70 percent of their registered users accessing their accounts this way over the last few months—a record high since October 2019. And Digital Live Chat use has doubled during the pandemic.
To avoid risk of virus transmission, many retailers and hospitality businesses have moved to non-cash payments only. While transmission via banknotes themselves isn‘t likely, the act of handing cash back and forth makes it impossible to maintain the recommended distance of 6 feet or 2 meters.
Indeed, according to RTI research, customers feel most safe when swiping or inserting a credit card. Across the globe, steps have been taken to make contactless payments easier; for instance, the limits for contactless or tap and go payments have been increased, and ATM or card transaction fees have been reduced.
Related: Best practices for handling cash during a pandemic
Undoubtedly, the experiences of COVID-19 will change people’s behavior. The move towards digital banking, contactless and mobile payments will keep accelerating. But does that mean that cash is dead? Definitely not. Cash remains, and will remain, a critical part of our payments system across the globe.
In fact, many U.S. states are considering legislation to force businesses to continue take cash with the New Jersey legislature and Philadelphia City Council having already passed such measures this year. The reason is that cash is an important part of consumer choice and there are large parts of the population who rely on it; they don’t have a smartphone or bank account to facilitate digital payments.
Due to reasons like this, and global usage trends that vary greatly by region, cash remains a trusted, reliable payment mechanism, particularly around financial inclusion, and it’s unlikely to change any time soon.