Perhaps you have heard dire predictions about the “disappearance” of cash. There is a notion that mobile payments are on the rise and online banking is growing at a record pace, and therefore people must be using less and less cash.
Well, the first part is true. Mobile payment methodologies and online banking are indeed growing faster than ever. But what people may not realize is that the need for cash is also growing.
Some might say, “Millennials are using things like Samsung Pay, Apple Pay and Venmo more and more for cash transactions.” And that’s true. But what is less recognized is that millennials are also largely driving the growing demand for cash.
There has been a sociological reaction among the younger generation. Prior to the financial crisis of 2008, credit was fairly easy to get. During the worst years of the crisis – precisely when the millennials were coming of age, access to credit was sharply curtailed, homes were foreclosed, and jobs were lost. Having cash in hand remained an important psychological safety net. Indeed, today we find that most transactions under $40 occur with cash, particularly among Millennials.
In 2005, there were about 5.7 billion $20 notes in circulation. Today, that number has increased to about 8.6 billion. And the Bureau of Engraving and Printing estimates that we’ll soon reach $10 billion $20 notes in circulation.
This dramatic increase in cash circulation has put pressure on the ATM industry. As a fundamental utility for providing cash, ATM manufacturers and financial institutions must work together to innovate their products, services and customer experiences so that people can have ubiquitous access to their cash.
The idea that mobile payments and online banking would soon eliminate cash is simply not coming to fruition. The reality is, there is no specific tender that has been eliminated since the Chinese invented coinage back around 600 BC. In other words, cash will continue to live on for the foreseeable future.
Stay tuned for our next blog post “The Future of Cash Part II: Implications of the underground economy”