We at BIG spend an unhealthy amount of time pondering the future trajectory of cash usage and its implications for credit unions- you’ll find some of our earlier analysis here.
Old-school paper notes and coins have been trending downward for many years, to varying degrees in different geographies. The pandemic turbocharged this decline, shuttering many of the brick-and-mortar locations where cash still reigned and selling new segments on the hygienic convenience of contactless payment forms like digital wallets. The question now becomes how many of these behavioral shifts will hold for the long haul.
The website Upgraded Points has done an impressive job compiling the latest info on cash spending patterns globally. Because the site’s primary focus is rewards points for the savvy traveler, its presentation is designed to resonate with a layperson- which makes it a valuable perspective for bankers and merchants to consider. Upgraded Points also plays it refreshingly down the middle, avoiding the too-common partisan approach catering to one of these professional audiences.
For instance, its report points out the paradox that at the same time cash use for transactions plummeted, the amount of cash in circulation actually increased nearly everywhere- notably the US and UK. A similar increase in cash hoarding occurred at another time of recent global uncertainty, the “Y2K crisis.” This time around, however, an increasing number of merchants refused to accept cash, rather than prepping for a situation in which cash might become the only game in town.
One of the more eye-opening findings of a YouGov poll is that the US is among five countries where at least half of consumers are wary of the move away from cash. Canada, Germany, France and Spain round out the list- and consumers in the latter three also happen to be among the heaviest cash users. On the other side of the coin (pun intended) 79% of respondents in India view a cashless world positively, and other Asian countries also tend to be favorably disposed.
Although an ongoing long term decline in cash usage seems assured, a remarkable number of forces pulling in various directions make the near-term picture murky. The types of storefronts most likely to transact in cash are enjoying customers’ long-awaited return, and several municipalities are introducing “must accept cash” ordinances in the interest of financial inclusion. At the same time e-commerce volumes- which preclude cash virtually by definition- continue to explode and merchants continue to agitate for lower debit and credit interchange rates, which would naturally encourage greater acceptance.
Then there’s the crypto phenomenon- and the increasing ability to use Bitcoin holding to pay for goods and services through wallets like PayPal’s. Anecdotally, I’m fascinated by the mixed message sent by a few local eateries which accept card only for the bill, yet “strongly encourage” cash tips.
For another clever history of cash, check out the recent “Cowries to Crypto,” an irreverently illustrated and well-considered narrative dating back to the fifth century yet focused on the most recent 150 years.
As for the next 5-15 years, it’s hard to discern a clear consensus around the future of cash- emotions, economics and politics all enter the equation, and sound arguments exist to support most views. It would make a great high school or college debate topic- and watching the next generation of consumers wrestle with the pros and cons of cash could yield valuable insights.