Cash Usage Following Same Path as Checks?
- Is cash "on its way out"?
- COVID-19 caused a steep decline in cash usage
- Predictions of a "cash crash" appear to have been premature
ATM Marketplace -- an organization with particular interest in paper currency -- asks the question: Will Cash Ever Go Away?
They note that cash usage in the U.S. declined from 26% of all transactions in 2019 to 19% in 2020 due to concerns over cleanliness during COVID-19. However, in 2021 and 2022, cash use leveled off at around 18-20% of all payments, indicating a potential "floor" for its usage.
So, has the "cash usage decline" leveled off?
Overseas, concerns have risen over the solvency of cash in places such as Australia, where the cash transportation company Armaguard has said that declining cash usage may make its business unable to operate.
That doesn't mean cash is completely obsolete by any means.
For one, an article by the Federal Reserve Bank of Boston pointed out that "conditions were ripe" for a "fatal cash crash" during the pandemic, but that did not occur.
"In 2021, cash use accounted for about 20% of all payments, and then about 18% in 2022, making it the third-most used payment method in the U.S. That leveling off after 2020 has experts thinking cash use may have found a 'floor' it won't fall below for a while," the article stated.
So, while cash usage may continue to decrease, it's unlikely to disappear entirely due to customer preferences for its physicality and practicality -- a trait shared by checks. ATMs are expected to continue providing necessary services regardless of the amount of cash in circulation.
Utilization of Cash for Products and Services
While cash usage may continue to decrease, it's unlikely to disappear entirely. Clearly, customers value the physicality and practicality of cash, and ATMs will continue to provide a necessary service in the coming years. The article's author, Bradley Cooper of ATM Marketplace, notes, "Cash may not be king anymore, but it is still royalty, and its title should be respected."
Cash is primarily for personal usage. Businesses would be hard-pressed to hand over a wad of cash to another business as payment, though this does occur. Restaurants, for example, handle cash and will occasionally utilize it as payment to vendors for product. But, for the most part, cash is handled by individuals to pay for products and services -- typically smaller purchases. Checks are more suitable for larger purchases, as it leaves a paper trail. This is a major reason why business utilize checks.
Another phenomenon that has recently emerged across the US is many states allowing sports betting and other gambling activities. According to Goldman Sachs, US sports betting could become a $45 billion business. And, while a majority of bets are made via phone apps, there are many physical locations that accept cash for bets and cash-only kiosks.
Cash Following in the Footsteps of Checks?
The utilization of cash is following a similar path that checks experienced. As you may know, for decades, industry professionals proclaimed the "death of checks"... yet, there are still over 10+ billions in checks written every year in the USA. This is a decline from its peak, but checks are still a major payment -- particularly with businesses.
As we've mentioned previously, checks remain a preferred payment method for businesses -- PYMNTS.com reports that 81% of businesses still pay other firms via paper checks. Businesses benefit from the "gap" between when the check is drafted and when it clears at the payee's bank, as well as the presence of a paper-trail for their payments -- reducing the amount of internal fraud.
As the US continues down a path of digitization, both cash and checks will still hold their respective positions as major payment methods. As for financial institutions, they must continue to process these payments efficiently, while embracing the newest and latest payment channels.