The use of hard cash as a percentage of total global payments is steadily declining but the key driver of its supply and demand is the consumer’s propensity to adopt alternatives such as digital transactions.
The use of legal tender such as coins and notes has been declining in mature first world economies since the 1990s when electronic banking started becoming popular. In recent years, countries such as India, South Korea and France have started regulating the use of cash to further reduce its usage, often with transaction thresholds or by eliminating certain note denominations.
Other countries have moved instead to restrict the use of alternatives to cash and in some cases ban digital currencies such as bitcoin, which is a growing threat to sovereign currencies that might disrupt traditional banking. A recent survey by ING Research across 13 European countries, America and Australia found that more than 20% of people living in Europe and America already rarely use cash and have completely adopted electronic payments.
Recently India’s government enforced demonetisation aimed at curbing tax evasion and money laundering, however in many cases it is the banking industry that is leading with digital alternatives to cash. FNB reported that cash withdrawals by middle income earners from ATMs reduced for the first time in February 2017 compared to the same period in 2016. These customers are opting to use point of sale devices, other electronic transactions and cash-at-till advances where the customer just adds “cash” to their grocery list at popular retailers.
