Cash at peak popularity, says recent study

Despite the speed and convenience of electronic payments—and their increased use around the world—there is “scant evidence” of a shift away from cash according to a recent study published by the Bank for International Settlements (BIS).

As retail payment systems continue to improve, few societies are close to “cashless” or even “less-cash,” reads the study, which suggests the appetite for cash remains unabated. Despite continuing digitization—and amid a period of groundbreaking innovation and transformation—the consistent “reports of the death of cash are greatly exaggerated, according to another study, this published in 2017 by Federal Reserve Bank of San Francisco CEO John Williams and data and policy analyst Claire Wang, of the U.S. Federal Reserve Cash Product Office.

“In the world of Apple Pay, Bitcoin, and Square, many believe that the days of cash are numbered. More payments are being made with a click, a tap, or a swipe, and it feels like we’re carrying fewer notes and coins than ever before,” reads the study by Williams and Wang. “It may come as a surprise that, despite the explosion of technology in the payments sector, over the past ten years, CIC (currency in circulation) grew faster than GDP (gross domestic product) in most countries (including Canada).”


The BIS study shows most advanced countries have all but replaced cheques with debit and credit cards, which are “now accepted by all but a few merchants.” New, instant electronic payment services are also emerging around the world, and many types of payment traditionally done with cash are going electronic.

“In Denmark, for example, church collection boxes and street performers now accept mobile payments. In China, fast food can be bought using ‘smile to pay’ facial recognition technology. In the United States, college students pay for pizza and beers using apps that broadcast the purchases to their social media friends. … The proliferation of mobile phones has, in some developing countries, allowed payment systems to leapfrog those in more advanced economies. For example, in Kenya and other places, mobile payments flow without bank accounts. Going forward, cryptocurrencies as well as fintech applications – the subject of feverish innovation by both small startups and large firms – will likely further disrupt existing business models. In addition, some central banks are considering the need to issue a digital version of cash (eg Sveriges Riksbank (2017b)).”

While recent trends might be suggesting a shift away from cash—both banknotes and coins—the data tells a different story.

“Based on the ‘Red Book’ statistics on payment, clearing and settlement systems collected by the Committee on Payments and Market Infrastructures (CPMI), cash in circulation and card payments (a proxy for e-payments) have both increased since 2007,” reads the BIS study, which adds only Russia and Sweden “show evidence of substitution between cards and cash.”


For central bankers, cash is an “evergreen topic,” meaning it’s seemingly ever popular, according to the BIS, whose study concludes demand for cash has “risen in most advanced economies since the start of the Great Financial Crisis,” adding this resurgence “appears to be driven by store-of-value motives (reflecting lower opportunity cost of holding cash) rather than by payment needs.”

“We find that people are using cards for payments more frequently and for ever-smaller transactions. This is driven, in part, by more people holding cards (in emerging market economies (EMEs)) and greater availability of point-of-sale (PoS) terminals (in both emerging and advanced economies). Nevertheless, the demand for cash remains robust around the world, except notably in some Nordic countries. Furthermore, many jurisdictions have seen an increased affinity for cash following the Great Financial Crisis (GFC). Digging a bit deeper and differentiating between “means-of-payment” and “store-of-value” demand for cash, we provide evidence that the increasing demand for cash is driven, in part, by the lower interest rates (hence a lower opportunity cost of holding cash) that have characterised the post-crisis period.”

For more information, read the full study by clicking here.

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