Cash trends in a digital world

Pounds, Euros, Rupees, Dollars, Rands and Shekels—and the various names of cash—are not things of the past even in an increasingly digital world. Yet, understanding cash trends is not so simple. Take India for example. Since 2016 there has been a push by the government for citizens to embrace digital transactions and move away from cash. 

Yet the use of cash has increased in India even as digital payments increased. In fact Indian demand for cash will grow 23% by 2025, with the value of cash withdrawals hitting a massive $1.2 trillion (an increase of 65% from 2019 transaction values).

This dynamic between the increase in digital payments and what it means for cash is happening in most countries including South Africa. There are some exceptions like Sweden and China, where digital payments already make up the majority of purchases. 

The notion of a cashless society has been talked about for decades, but, for many reasons, cash remains an essential part of most countries’ economies and their consumers’ lives—even as digital payments gain ground.

The importance of cash transactions around the world

Every country has different cash trends as well as some similarities. Let us take a closer look at some of them.

Japan:  Despite Japan being the number one technologically advanced country in the world, cash remains a big part of Japanese society for many reasons. In fact the use of cash in Japan reveals some of the country’s interesting cultural and lifestyle trends.  

For example there is the common use of Tansu Yokin—the Japanese widespread practice of keeping large amounts of cash in dresser drawers. You might think that sounds like a great way to get someone to break into your home but that reveals something else about Japan—it is safe. 

It is not uncommon for someone to carry large amounts of yen in their wallets. If they lose it, it is often returned with the money untouched. There are also hundreds of thousands of small, family-owned businesses that rely on cash in addition to the natural disasters that have knocked out power making people wary of digital payments. It is easy to see why cash is still so important to the Japanese way of life.   

The United States:        Many Americans still use cash although most use credit and debit cards more to pay for things like groceries. According to the Federal Reserve, currency in circulation is increasing at a rate not seen for over 70 years with $2.07 trillion USD in circulation. 

In a survey done recently 1,000 U.S. consumers were questioned about their payment preferences including cash.  Of those surveyed, 37% said they prefer cash to any other forms of payment. And of those who said they prefer cash, 39% said it was to prevent overspending with 34% saying that they saw cash as a safer way to pay (less chance of fraud compared to digital payments).

South Africa:    While cash is still king in South Africa, digital is slowly gaining ground. Mobile payments are becoming much more common with Apple Pay signalling its intention of entering the country’s market

Without question cash remains the most trusted and recognizable form of payment particularly for older generations and for people who own and operate small markets and businesses in South Africa.

How financial institutions address cash in a digital world.

Financial institutions (FIs) are in a unique position as consumer demand for digital payments and the convenience they bring has increased substantially. But consumers still want access to cash particularly in South Africa.

As the leading independent deployer of ATMs in South Africa, Spark ATM Systems, with over 4500 ATMs owned and operated in South Africa, the demand for cash particularly during Covid-19 has increased significantly. It is clear that cash is very much the dominant method of concluding transactions in South Africa.

So, which is more important for a bank; cash or digital? Neither wins that award. During the pandemic, FIs have had to quickly pivot both their cash management operations as well as upping their digital game to enable consumers to access more banking services via their own devices.  

The need to get a handle on the digital world which began before the pandemic has seriously accelerated and is now a top priority for FIs.

For cash, it is largely about not running out of it at the ATM. The reason for that is clear; every year consumers withdraw over $12.6 trillion USD from 3.1 million ATMs globally. That equals to cash withdrawals of $400,000 every second.

The biggest trend of all to monitor is – CHANGE.

There is no debate that change is happening every day. The world that was yesterday and today is not the same world we will wake up to tomorrow. While the digital wave and or the Industrial Revolution is upon is, cash is still very much King in many of the countries around the world.