While it has become increasingly common to pay for small purchases with a card, cash use has decreased in recent years. While there is no way to completely eliminate cash, it is likely to disappear from some markets altogether. Several cities have already passed legislation to prevent card or contactless payments from being accepted at their establishments.
Cash as a form of payment has gone away so quickly
A lot of people have been predicting that cash will be phased out soon, but the rise of credit cards, contactless payments, and cryptocurrencies have only made the death knells ring louder. Perhaps the strongest reason to keep using physical money is its psychological connection to money. Even if cash is quickly disappearing as a form of payment, it will always be around. This makes it an indispensable form of payment in some sectors, like retail.
In recent years, several stores, including Amazon Go and Sweetgreen, have stopped accepting cash. While the move toward digital payments is welcome, it has also prompted a backlash from critics who felt excluded by the absence of cash. In response, the Centers for Disease Control and Prevention have encouraged stores to adopt digital payment options like apps and touchless payment systems. Some countries, like South Korea, quarantined banknotes for two weeks before releasing them back into circulation.
It’s a universal means of payment in the euro area
In the euro area, cash is the most common form of payment. More than half of all point-of-sale transactions in the euro area are made with cash. Banknotes also provide a sense of independence, as they are the only payment method that does not require electricity, internet or equipment.
In Germany, cash usage is higher than that of people in the rest of the EU. According to the EHI Retail Institute, 48.6% of all sales in Germany were made with a credit or debit card. This is among the highest proportions in the EU. “Cash is much easier to use than plastic,” says Doris Neuberger, head of the money and credit department at the German University of Rostock.
It’s a preferred payment type for small transactions
When surveyed on payment preferences, consumers reported that cash is the preferred method for small transactions. While consumers preferred to use their debit or credit cards more often, cash is still the preferred choice for small transactions. This is largely due to the fact that cash is more convenient to carry and use than cards, and it does not incur transaction fees. Despite its popularity, however, cash is declining as a primary payment method.
While cash is no longer the primary payment method, it remains the preferred option for small-ticket transactions. According to Diary research, cash is the preferred payment method for twenty percent of all consumers. Cash payments account for fourteen percent of total consumer transaction value, compared to twenty-nine percent of credit card and debit card transactions. The report also indicates that consumers use cash for many types of small-ticket purchases, which are generally under $10.
US economist Kenneth S. Rogoff has argued for a society without cash. This approach not only discourages crime and tax evasion, but also allows governments to deal with economic crises more efficiently. In addition, with the “zero lower bound” interest rate no longer a constraint on financial policies, cash can be used as a substitute for negative interest-rate bonds. This would reduce the use of cash in society, but would also make government finances less difficult to manipulate.
Why should we care about cash? In many countries, it is widely accepted, anonymous, and stable. And while the number of digital currencies is growing, cash still stands out as one of the most secure forms of payment. In fact, according to Quartz Obsession, a podcast by the New York Times, cash is more common than ever. In this podcast, Kira Bindrim explores why cash is so important to protect in the future.
Central banks have long served as privacy providers for consumers, but they have no intention of staying in that business. Despite this, they are currently in the process of phasing out paper money. But their future will probably be built on privacy regulation and a constant erosion of citizen rights. In fact, one central banker has already pushed opinion away from privacy protection for CBDCs by arguing that anonymous CBDC poses “security risks” to users.