Bank of England stocks the cash vault as demand continues to grow
16 September 2015 | 7330 views | 3
Demand for cash is unlikely to be severely dented by the growing availability of alternative forms of payment over the coming years, declares the Bank of England in its quarterly bulletin, noting that half of all UK banknotes are active in the black market or held overseas.
People can now make payments using debit and credit cards (including contactless technology), internet banking, mobile wallet’, and smartphone apps.
Yet despite these developments, cash continues to play an important role, with demand for Bank of England notes growing faster than nominal GDP. There is now the equivalent of around £1000 in banknotes in circulation for each person in the UK, notes the central bank.
The evidence available indicates that no more than half of Bank of England notes in circulation are likely to be held for use within the domestic economy for legitimate purposes. This includes cash used for transactions and for ‘hoarding’.
The remainder is likely to be held overseas or for use in the shadow economy. However, given the untraceable nature of cash, it is not possible to determine precisely how much is held in each market.
While the future rate of growth in demand for cash is uncertain, overall demand is likely to remain resilient, believes the BofE.
Nonetheless, the Bank says it will continue to monitor developments and "respond as necessary".
"Cash is not likely to die out any time soon," says the central bank. "As such, cash issuing authorities need to work with the cash industry and continue to invest in notes and coins."
The Bank's confident assessment comes as new research from RBR shows that the number of payment cards in circulation worldwide increased by 11% in 2014 to reach 12 billion, boosting worldwide card spend to $20 trillion, a 15% year-on-year growth.