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What's the secret behind the ongoing popularity of cash?

By : Colin Gordon

April 12, 2018 08:00 AM

As payment technologies evolve and the range of transaction methods available to consumers continues to expand, many industry experts continue to claim that we are on our way to a cashless future.

 

However, while we see data showing that cash has taken a progressively smaller share of the overall payments mix as consumer choice has increased, it remains an extremely popular and widely used transaction method. Consulting firm Retail Banking Research (RBR), reported that global ATM cash withdrawals totaled over $13.6 trillion dollars in 2016 (Source: RBR Global ATM Market and Forecasts to 2022).

 

So, what is the secret behind the enduring popularity of this centuries-old payment instrument?  Why will it remain important to consumers as part of the various payment choices open to them?

 

'Resilient and often preferred'

 

One of the key themes in the 2017 US Health of Cash Study by Edelman Intelligence and Cardtronics is that in a "digital-trending world", cash remains "resilient and is often preferred".

 

The vast majority (91 percent) of respondents to the survey said they used cash for either purchases or P2P transactions. Fewer people said the same about debit cards (72 percent), credit cards (68 percent) and digital payments (51 percent).

 

When all consumers were asked to identify their preferred payment method overall, cash (27 percent) ranked behind debit card (33 percent), but ahead of credit card (22 percent), digital (15 percent) and check (three percent). However, amongst millennials, cash took top spot (29 percent), followed by debit card (26 percent), digital (25 percent), credit card (17 percent) and check (three percent).

 

When it comes to why so many people continue to use and value cash, there are a number of key factors, one of which is that many consumers appreciate the simplicity and convenience of physical currency, particularly for P2P payments.

 

In a recent blog post, titled 'Reports of the Death of Cash are Greatly Exaggerated', John Williams, president of the Federal Reserve Bank of San Francisco, noted that cash is "widely accepted, easy to use, and doesn't require a bank account or mobile phone".

 

He continued: "People hold cash as a store of value. It can be convenient and reassuring to have immediate access to money, especially in case of an emergency or in situations of political or economic turmoil."

 

It's also highly possible that, in our increasingly digital, electronically recorded world, there are many people who value the privacy of cash transactions.

 

The global picture

 

Cash clearly remains close to most consumers' hearts in the US, but what about the rest of the world?

 

After studying currency-in-circulation (CIC) figures for 42 global economies - which collectively account for 75 percent of the global GDP - the Federal Reserve Bank of San Francisco found that CIC growth matched or exceeded GDP increases in all but two nations. This is significant because traditional thinking suggests CIC should grow at about the same rate as GDP, not accounting for other factors affecting demand for cash.

 

The two countries where CIC growth did not keep up with GDP - Norway and Sweden - have taken direct action to remove cash from the financial system. This has included efforts by banks to encourage digital transfers, heavy investment in card payment systems and collaborative initiatives to launch non-cash payment instruments such as Swish, Sweden's mobile payments service.

 

While this sort of change could be seen as positive for those consumers who are engaged and comfortable with cutting-edge payment technologies, it could be argued that people who prefer more traditional methods are having their choice taken away from them.

 

Backing up the findings from the Federal Reserve Bank of San Francisco, the latest figures from the European Central Bank show that cash was the dominant payment method at points of sale (POS) across the euro area in 2016. More than three quarters (79 percent) of all transactions were carried out using cash, accounting for more than half (54 percent) of overall value of POS payments.

 

Despite the broad - and consistently expanding - range of digital payment instruments available, all the signs point towards the majority of global consumers continuing to show demand for notes and coins. For many years to come, cash will continue to be important to consumers alongside mobile, digital and other online payments.

Colin Gordon

Financial Services SelfServ, Marketing Manager

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Colin Gordon is a Global ATM Marketing Manager based at NCR’s R&D Center in Dundee, Scotland. Colin is responsible for the marketing of NCR’s financial hardware portfolio with a specific focus on activities such as demand generation, sales enablement, market analysis and customer engagements for the ATM business.