It's the one question all of us involved in the industry continue to ask. As cash maintains a significant role in Western economies like the US and UK, who is it that continues to choose cash over other payment methods and why do they do so? In April 2018 a G4S review entitled 'World Cash Report' 'surveyed 47 countries accounting for over 90 percent of the world's GDP. The findings show that demand for cash continues to rise globally despite the increase in electronic payment options, including mobile, in recent years. Cash in circulation relative to GDP has increased to 9.6 percent across all countries, up from 8.1percent in 2011. (Payments Cards and Mobile 23 April 2018).
To consider how and why cash remains important we really need to scratch beneath the surface to discover who is making these payments. In the US research studies such as the Federal Reserve's Diary of Consumer Payments provide valuable insight. At first glance some of the findings are surprising. The 2018 version of the consumer payments survey revealed that:
- The average value of cash held continues to rise
- Though cash accounts for 30 percent of all transactions, transaction value is an important factor. Cash is used for 55 percent of transactions below $10 and 32 percent of those between $10 and $24.99
- Cash is used for 39 percent of 'in person' payments
- When you consider age as a factor there is no direct correlation. The share of cash use was equal (34 percent) for those aged between 18 and 25 and those aged over 45
- Income is certainly a factor - for those earning less than $25000 47 percent of payments are made in cash. For those with incomes of over $125,000 24 percent of payments are made in cash (cash remains the second highest payment method after credit cards for this sector)
- There is no doubt that for all income groups cash remains important - 'households with incomes below $25000 and those above $125,000 both show a steady increase in cash holdings '
In the UK though cash continues to play an important role with an estimated 11 billion cash payments in 2018 and 28 percent of payments involving cash, there is no doubt the increased take up of contactless is having an effect. Last year there were 7.4 billion contactless payments (up 31 percent from 2017). UK Finance has also reported that 2 million more people used cash no more than once a month during 2018. However, at the same time 1.9 million (many of whom were in receipt of low incomes) relied mostly on cash.
Factors such as age, income and location have an impact on cash usage. According to UK Finance, one in six 18 to 25-year olds behave in a largely cashless manner. The equivalent figure is one in ten for all age groups. As for regional variations, in the North West only 58 percent have adopted contactless payments, compared with 70+ percent in the South East, Midlands, London and Wales.
Where does this leave us? In 2028 it is now forecast there will be 3.8 billion cash payments in the UK. Things are certainly changing, but the market is complex, both in the UK and the US. One thing is certain. Nobody in either country is expecting a cashless society any time soon.
