What is the future of cash in this increasingly digital world?
At the Asia Cash Cycle Seminar 2022, the future of cash was a hot topic. Meeting for the first time since the global pandemic, it was clear the landscape had shifted. People looked to industry leaders and professionals to hear their experiences of societal changes to cash. After all, it is widely known that the pandemic accelerated the increase in digital payments.
Future of Cash: USA
In the US, the Federal Reserve noted that cash is still growing. Furthermore, cash circulation in the US is only increasing. In fact, the Federal Reserve found a 7% increase year-on-year. Only 43% of US adults say they are comfortable without holding cash outside their homes. To further support the strength of cash, the US saw a bounce back in cash transactions since the pandemic. They suggested there could be a ‘floor’ on the decrease of cash transactions. Cash is the third preferred payment method in the US, behind debit cards and credit cards. Although interestingly, of those who say cash is not their prefered method, it is their second.
Future of Cash: Philippines
Deputy Governor Mamerto Tangonan from Bangko Sentral ng Philippines shares what trends occurred in the Philippines. A trend that continued, even in a developing economy such as the Philippines, was the rise of digital payments. Even before the pandemic, they were steadily increasing. In 2019, the volume of digital transactions increased by 27% from the previous year. Digital payment methods were a lifeline for Philippine retailers during the pandemic. 39% of retailers believed they would not have survived without e-commerce.
Unlike the US, cash remains king in the Philippines. 94% of Philippinos said they prefer cash payments over any other method. However, although those figures suggest a negative attitude towards digital payments, this is incorrect. 99% of Philippinos said they intended to continue using digital payment methods after the pandemic.
Future of Cash: Australia
Merylin Coombs from the Reserve Bank of Australia shared the trends and position in Australia. Again, as we saw with the US and the Philippines, cash in circulation was also increasing in Australia. Before the pandemic, 4% of Australia’s GPD was in circulation. After, it rose to 4.5%. In fact, with such a high circulation volume, every Australian has on average, 37 $50 notes on them. Contradictory, cash transactions decreased. In 2007, 70% of transactions were in cash. In 2019, this dropped to 30%.
Future of Cash: Thailand
Pairote Balun from the Bank of Thailand discussed the recent trends in Thailand. Similarly to the other countries, Thailand also saw increased cash circulation. Cash circulation grew 13% from 2019 to 2020 and 11% from 2020 to 2021. Curiously, although there was an increase in circulation, 53% of Thai people decreased the amount of cash they held out of their homes.
What is interesting is the trends of steeper increases during lockdowns and restrictions. Another significant figure presented was the growth in digital transactions across the pandemic. From January 2019 to January 2022, the volume of e-payments increased by 67%.
So, What is the Future of Cash?
Clear trends are apparent across the globe, no matter the makeup of the market. Cash circulation is increasing; much research shows that cash ‘hoarding’ increases during uncertain times. Another contributing factor to excessive cash is the use of coins. As digital transactions increase, the need for coins decreases, meaning households often have stockpiles of coins not recirculating. Regardless, people across the globe are still using cash, be that a minority or a reducing majority. Some people use cash to budget in times of financial difficulty. Some people and communities do not possess digital infrastructure due to remoteness, are underdeveloped or lack financial resources.
The bounce back in cash transactions after the pandemic does suggest a current ‘floor’ in the reduction. The truth is, no one can predict the future of cash. There are trends right now which indicate a number of possible outcomes. Only the future will tell what will happen. The only sure thing is that cash is still prevalent and very much relied upon.