On the money: Death of cash greatly exaggerated
new york — Everywhere you look, someone is trying to kill off cash.
India eliminated 23 billion notes from circulation in an effort to fight tax evasion and corruption. Bitcoin and mobile payments are still hyped as the wave of the future while credit cards offer increasingly aggressive rewards. An influential US economist wants to stop printing denominations of $20 and above. His goal: help central banks impose negative interest rates as monetary policy.
But try as everyone may, cash registers are still bursting with paper bills and metal coins. Cash is alive and well, according to a new study of the spending habits of more than 18,000 people in seven countries.
“Many have predicted and espoused the value of dollars and euros in circulation since 2005 the view that cash is increasingly disappearing as a payment instrument,” the authors write. “However, to paraphrase Mark Twain, we would say that the reports of the death of cash have been greatly exaggerated.”
The value of dollars and euros in circulation has doubled since 2005, to $1.48 trillion and €1.1 trillion, respectively. Some of that growth can be explained by demand for these currencies in foreign countries, but there’s also plenty of evidence that Europeans and Americans are still carrying around wads of cash.
The new research crunches and compares data on payment choices in Australia, Austria, Canada, France, Germany, the Netherlands and the US. The study shows notable differences among these countries: Germans and Austrians carry around and use the most cash; the Dutch love debit cards; paper checks are still relatively common in France and the US.
The bottom line, however, is that consumers in all seven countries use cash more often than they use any other payment method. Cash is least popular in the US, where it’s used for 46 per cent of all transactions versus 26 per cent for debit cards and 19 per cent for credit cards.
Cash’s niche is for small transactions. The typical person makes one or two purchases a day. For the cheapest half of those, consumers in all seven countries prefer cash the vast majority of the time. For more expensive purchases, top payment choices vary significantly from country to country. Austrians and Germans still use cash for big purchases, but most other countries prefer debit, credit, or checks. — Bloomberg