24 January 2018
visit www.ebaday.com

Demand for cash shows no sign of diminishing

23 November 2017  |  9311 views  |  6 cash

Despite the explosion of technology in the payments sector, demand for notes and coins continues to match or outpace GDP in all major economies bar Noway and Sweden, according to a report produced by the San Francisco Federal Reserve.

The Fed researchers looked at cash use in 42 economies across the globe, which together account for 75% of world GDP.

The study used currency in circulation (CIC) as as a proxy for cash use and compared it with GDP growth over the a ten-year period from 2006 to 2016.

The countries colored green saw CIC growth match or outpace the growth of GDP. The two countries colored red — Norway and Sweden — experienced outright declines in CIC over the past decade. The countries colored gray are those for which there was no comparable data.



Figure 1
CIC growth compared to GDP from 2006 to 2016
Currency In Circulation Map
Source: IMF and authors’ calculations.

"The predominance of countries colored green suggests that other factors besides income growth are fueling the growth in CIC," the report states, pointing out that  some countries like Mexico and South Korea saw CIC outpace GDP by more than 100 percentage points. "Presumably, very low interest rates in many countries over the past decade has been one factor boosting the demand for cash, as well as uncertainty following the global financial crisis."

Only Norway and Sweden bucked the trend,  mainly thanks to government initiatives, financial institution coordination, and widespread electronic payments infrastructures.

Norway’s central bank acknowledges that cash’s role “continues to diminish” as consumers move towards electronic payments, and it contemplates what the future form of money should be. The country’s largest bank, DNB, has eliminated cash in its branches, explaining that only six percent of Norwegians use cash on a daily basis. The bank has also proposed that Norway eliminate the 1,000 kroner note.

While Norway has been moving away from cash, Sweden has garnered attention as the poster child of cashless countries. Since the 1960s, Swedish banks have encouraged digital bank transfers, charged for cheques, and invested heavily in card and mobile payment systems.

"A look at the data shows that Mark Twain’s wise words ring true: reports of the death of cash have been greatly exaggerated," the report concludes. "A few countries have managed to move away from notes and coins, in favor of digital payments. But despite the plethora of digital options, in most countries, demand for notes and coins is strong and shows no signs of slowing down."

Comments: (6)

Bo Harald
Bo Harald - ZEF, Transmeri, Demos, Real Time Economy Program - Helsinki Region | 23 November, 2017, 11:00

Very steep decline in cash has continued in Finland since about 10 years. And why not...

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Bo Harald
Bo Harald - ZEF, Transmeri, Demos, Real Time Economy Program - Helsinki Region | 23 November, 2017, 11:02

https://www.finextra.com/blogposting/14258/demise-of-cash

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Robert Jarvis
Robert Jarvis - LFF - Luxembourg | 23 November, 2017, 11:11

I think the time period of 10 years 2006-2016 is too large to show how technology is impacting payments.

I thinkfocussing on the last 2-3 years would show quite a lot more CIC declining in countries.

3 thumb ups! 3 thumb ups! (Log in to thumb up)
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 24 November, 2017, 16:01

Not really @RobertJarvis, at least not for USA, for which I have figures readily.

If you look at chart at the end of my post How To Really Kill Cash, CIC figures for USA are:

2005: $0.75T 

2012: $1.15T

2015: $1.38T

CAGR in Last 10 years is 6.29% and CAGR in Last 3 years is 6.27% i.e. are both ~6.3%.

Ergo no difference in CIC growth over last 10 or last 3 years.

1 thumb up! 1 thumb up! (Log in to thumb up)
Taco De Vries
Taco De Vries - Payments Advisory Group - Amsterdam | 28 November, 2017, 21:29

Rather crude analysis with conclusions based on single metric (CIC/GDP), yet not necessarilly untrue.. Value of ATM withdrawals would be another indicator to use.. For more comprehensive research visit: https://www.linkedin.com/pulse/cash-europe-reports-my-death-have-been-greatly-taco-de-vries/ Working on World Cash Report as we speak, planned to be released in Q1-2018

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Bo Harald
Bo Harald - ZEF, Transmeri, Demos, Real Time Economy Program - Helsinki Region | 29 November, 2017, 06:29

Cash is the criminal's best friend. And the grey economy's.  And so is paper and PDF invoicing for fraudsters. Should be outlawed.

 

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Uneasy sits the crown as cash use continues decline

Uneasy sits the crown as cash use continues decline

11 August 2017  |  12524 views  |  1 comments | 3 tweets | 8 linkedin
Cards overtake cash for consumer payments in Australia

Cards overtake cash for consumer payments in Australia

27 July 2017  |  15651 views  |  2 comments | 19 tweets | 28 linkedin
Debit cards overtake cash to become UK's top payment method

Debit cards overtake cash to become UK's top payment method

12 July 2017  |  15144 views  |  3 comments | 36 tweets | 60 linkedin
Dutch banks bid to manage falling cash use through joint ATM network

Dutch banks bid to manage falling cash use through joint ATM network

31 May 2017  |  7748 views  |  0 comments | 6 tweets | 19 linkedin
ATMIA hits out at 'anti-cash' financial exclusion lobby

ATMIA hits out at 'anti-cash' financial exclusion lobby

27 April 2017  |  7616 views  |  2 comments | 10 tweets | 10 linkedin
Cash in retreat, but not dead yet - ING

Cash in retreat, but not dead yet - ING

26 April 2017  |  7649 views  |  4 comments | 13 tweets | 18 linkedin
Cash continues to dominate POS payments in Europe

Cash continues to dominate POS payments in Europe

04 April 2017  |  11403 views  |  6 comments | 24 tweets | 27 linkedin
The pound will not be round, or maybe around, for much longer

The pound will not be round, or maybe around, for much longer

28 March 2017  |  5932 views  |  6 comments | 7 tweets | 13 linkedin
Britain to go cashless in 2043?

Britain to go cashless in 2043?

14 March 2017  |  15230 views  |  4 comments | 21 tweets | 27 linkedin
Cash market share squeezed by plastic cards and electronic transfers - RBR

Cash market share squeezed by plastic cards and electronic transfers - RBR

18 January 2017  |  5149 views  |  0 comments | 7 tweets | 9 linkedin
Christmas brings record UK ATM cash withdrawal figures

Christmas brings record UK ATM cash withdrawal figures

06 January 2017  |  7026 views  |  2 comments | 12 tweets | 11 linkedin
Cash to account for less than a quarter of US transactions by 2026 - research

Cash to account for less than a quarter of US transactions by 2026 - research

15 December 2016  |  8720 views  |  3 comments | 14 tweets | 12 linkedin
The shrinking economy; Bank of England on durability of cash

The shrinking economy; Bank of England on durability of cash

04 October 2016  |  6357 views  |  2 comments | 13 tweets | 8 linkedin

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.capgemini.comvisit www.nextgenbanking.co.ukvisit www.ebaday.com

Top topics

Most viewed Most shared
Banks shift priorities toward growth, digitisation and innovation - surveyBanks shift priorities toward growth, digi...
10027 views comments | 38 tweets | 49 linkedin
Sbanken opens developer portal and invites customers to build their own digital bankSbanken opens developer portal and invites...
8673 views comments | 17 tweets | 11 linkedin
Could distributed ledgers restore the reputation of the MBS market?Could distributed ledgers restore the repu...
7210 views comments | 6 tweets | 9 linkedin
Blockchain security startup Ledger scoops £56 million funding roundBlockchain security startup Ledger scoops...
7050 views comments | 10 tweets | 11 linkedin

Featured job

Competitive
London, UK (or flexible)

Find your next job