Not everyone has traded in cash for plastic: why cash still matters

By : Scott Millar

May 29, 2014 11:01 PM

Cash is on its last legs? Don't believe the hype. With $4.6 trillion of cash and coins in circulation, cash is as relevant and important to our lives and economy today as ever before,  according to the Bank of International Settlements.


No, cash is not on its last leg. It's just that its role is changing and adapting to the disruptive effect of modern technology, such as mobile and electronic payments in general.


Many people have been quick to dismiss cash as something that is “in the past,” especially as the use of cards and online payments take center stage. Mobile payments and other alternatives steal all the headlines, while cash quietly goes about its business.


The US is a great example. As an advanced economy with a huge reliance on plastic cards, widespread access to the internet and a very high smartphone adoption rate, the country should - if we take things at face value - be ripe for ditching cash. Far from it.


Cash dominates small transactions


A new Federal Reserve study shows exactly the opposite. "Cash plays a dominant role for small-value transactions, is the leading payment instrument for many types of purchases, and stands as the key alternative when other options are not available," explained the authors of the Diary of Consumer Payment Choice.


We even see cash used for large-value transactions among the relatively less well-off. Millions of Americans have no bank account. For them, cash certainly remains king, even if things like prepaid cards are proving very useful.


It's the sheer versatility of cash that appeals. At 40 percent, cash makes up the single largest share of consumer transactions. Debit cards are next at 25 percent, with credit cards at 17 percent. When all is said and done, you can always rely on those greenbacks being accepted.


Flexible and faithful cash


For businesses and consumers, cash is the default option when all else fails. According to a recent RBR report, "Global ATM and Market Forecasts to 2018” (September 2013), $13.2 trillion was withdrawn from ATMs in 2012.  This flexibility is particularly important at the lower end of the market, and we see that cash remains the major payment method for low-value transactions.


The Federal Reserve report shows Americans make lots of low-value transactions each month, and they are using cash for the bulk of these transactions. Even when other options are available, people regularly use cash.


To sum up, the RBR report notes that "while debit and credit cards are growing strongly, and cash's share of total consumer transactions may well be declining ... cash still plays a very significant role in the consumer payments landscape."  A significant role indeed -- and one that will continue to evolve in the years ahead.


Learn more about NCR Financial Services.

Scott Millar

Global Solutions Marketing Manager

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Based out of NCR’s R&D Centre in Dundee, UK, Scott Millar is responsible for establishing the marketing strategies and enhancing the strength and market share of the NCR Financial Hardware Portfolio. Here, Scott shares his insights.