People have been predicting the end for physical money for nearly 60 years. With the rise of credit cards, contactless payments and cryptocurrencies like Bitcoin the death knells have only gotten louder. It may seem like physical money could soon be a thing of the past, but if you take a closer look at the evidence – and the intriguing psychological relationship we have developed with notes and coins – you’ll find that it’s a bit premature to predict cash’s disappearance, believes BBC.
Physical money has been with us for thousands of years for a reason. Cash is essentially untraceable, it’s easy to carry, it’s widely accepted and it’s reliable. If the power goes out, or there’s a blip in the electronic systems that make the online commerce world go round, cash is there. If someone wants to buy something without anybody tracing it back to her, cash is the way to do it. If someone wants to be certain that their form of payment will be accepted, cash is the best bet. Even with advances in technology, some of the aspects of cash simply aren’t reproducible with bits just yet.
There is simply no alternative system of payment that is as convenient, reliable and anonymous. Bitcoin is anonymous, but currently unstable and inconvenient. Credit and debit cards are widely accepted, but they instantly connect your purchases with your person. Peer-to-peer payment systems like Paypal or Venmo require apps and accounts, and are still easily traceable.
Then there’s the question of global reliability. In the case of American money, cash has value beyond the borders of the country. In fact, two thirds of cash holdings in American dollars exist outside the country. People store up cash for emergencies, to keep a safety net, and to ensure that whatever happens, their wad of cash will be there for them.
Number crunching
It’s difficult to put a number on just how much cash is used day-to-day across the globe.
The first way to estimate cash use is to calculate how much of it is in circulation. By this measure, cash is far from disappearing. In the United States, cash in circulation grew 42% between 2007 and 2012, and the amount of American money floating around in bills and coins is expected to grow by about 5% each year. The average growth globally is 7% per year, according to Eric Ziegler, President of the Security Technologies Group at Crane Currency, which manufactures notes.
To get some sense of how cash moves, economists design models and surveys. In the Netherlands, for example, economist Nicole Jonker and her team at the Dutch National Bank conducted something called a diary study, in which they asked participants to write down a day’s worth of transactions, both cash and non-cash. From there, Jonker and her team built a picture of the how Dutch people were buying things.
The Netherlands is an interesting case study to look at more closely, because their retail sector has recently embraced card payments in a big way. There are now 1,400 supermarkets in the Netherlands with registers that don’t accept cash.
As a result, card payments in the Netherlands have been growing by about 8% annually over the past few years. And yet, cash is still king. In 2012, there were 2.7 billion card payments, but an estimated 3.5 to four billion payments were made with cash. “Even in supermarkets which all accept debit cards, cash is still used heavily,” Jonker says. “For the time being we think cash will keep on having an important role.”
Studies of other nations tie in with these findings. In the UK, half the transactions by consumers in 2013 were with cash, according to a report released in May by the UK Payments Council (now known as Payments UK). “The current forecast is that this figure will drop below 50% next year (2016), but there is no prediction for cash to disappear,” the report reads.
And one study that rounded up surveys like Jonker’s from around the world found that, in the seven countries they looked at — Australia, Austria, Canada, France, Germany, the Netherlands and the United States, 46-82% of all transactions in 2012 were conducted using cash (a wide range that may reflect both the uncertainty in the survey methods, and the variability between nations).
Even countries that are often held up as the leaders of a cashless crusade, such as Sweden and Denmark, aren’t really getting rid of notes and coins. In June of this year, there was a round of headlines declaring that Denmark would rid itself of cash by 2016. “Burn your bills: Denmark wants to go cashless by 2016,” the headlines read. Not even close, Rene Thomsen, manager at the Danish Bankers Association told me. “I think, there’s been some misunderstanding on what the Danish proposal really is,” he said. In Denmark, he explained, there is currently a rule that all shops must accept cash. This new proposal would let some shops get around that rule. That’s all.
“It’s difficult to say, but I would be very surprised if we didn’t have cash in 10 to 15 years,” he says. “It’s hard to imagine that within 10 to 15 years that it’s not possible to go into a bank and say ‘I would like $1,000 and I want it in cash.’”
“Until we have sufficient and reliable alternatives in place, it would be dumb to get rid of cash now,” says David Wolman, author of the book The End of Money. “Honest people and legit businesses still rely on it.”
For more details you can read the full article: BBC Future – The truth about the death of cash
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