DFC

"People seem to think that cash is free, but it really isn’t. The cost to merchants is significant (which is why an increasing number of them don’t take it) and the cost to society should not be overlooked. So should we really be imposing a stealth tax on merchants by forcing them to accept cash any more than we should be forcing them to accept Bitcoin or, for that matter, cards? The answer is, frankly, no."

The Bank of Canada published the results from the 2021 Methods-of-Payment (MOP) Survey. It finds that while fewer Canadians are holding cash, those who do have cash tended to hold higher amounts over time. This is associated with fewer trips to obtain cash, but larger amounts withdrawn for a given trip, on average. Views about the features of cash have changed somewhat in recent years, though cash is still viewed quite positively in terms of acceptance, cost, ease of use and security. Most Canadians have no plans to stop using cash in the future.

"In recent years, the rise in digital payment innovations such as contactless cards and Interac e‑Transfer has spurred a discussion about the future of cash at the point of sale. The COVID-19 pandemic has also contributed to this discussion: While consumers reported that some merchants started to refuse cash early on in the pandemic, such reported refusals dropped as the pandemic progressed. The Bank of Canada’s most recent Merchant Acceptance Survey (MAS) took place in 2018, prompting a need for updated data to study merchant cash acceptance, payment trends and conditions for the potential issuance of a central bank digital currency (Lane 2020, 2021a). Against this background, the Bank conducted the 2021–22 MAS Pilot Study to monitor payment methods accepted by small and medium-sized businesses (SMBs). Survey data was collected from merchants in two batches, in late 2021 and early 2022. Our results show that 97% of SMBs in Canada accepted cash in 2021–22 and only 3% have plans to stop accepting cash. For cards and digital payments, merchant acceptance has increased since 2018. Additionally, the acceptance of different payment methods varies by the size of the merchant, industry and region."

"Nigeria will ban cash withdrawals from government accounts from March 1 to tackle illicit activity and push toward a cashless economy. "

A European Central Bank (ECB) blog post by Ulrich Bindseil and Doris Schneeberger discusses findings from a recent ECB consumer survey and what they mean for the future of cash and digital means of payment. "Despite the preference for cashless payments, 60% of euro area consumers state that they value having the option to pay in cash. This shows that people appreciate having a choice when it comes to how they pay. Their decision may then depend on the particular situation or purchase." The post made it clear that "as cash remains widely used and valued, [the ECB is] committed to maintaining euro cash and will continue to make sure it is available.

"The rapid succession of crises, particularly the Covid-19 pandemic and the Russian invasion of Ukraine, have clearly demonstrated the importance of a resilient cash cycle. Several countries are taking measures to further secure the supply of cash in times of crises."

"It's good to see people getting more critical about cashless society, but often their main concern is about governments doing surveillance of our digital payments. In reality, there are at least 9 other reasons to fight cashless society, all of which are just as important" [Brett Scott]

Oz Shy, Senior Policy Advisor and Economist at the Federal Reserve Bank of Atlanta, has compiled a spectacularly comprehensive literature review on consumer demand for cash covering 271 papers. Its publication in the Journal of Economic Literature is forthcoming. “Why is economic research on cash needed?” asks Shy. “A short and simple answer to this question is that cash does not seem to be going away.

The Reserve Bank of Australia (RBA) published a paper on Australians' cash usage. It finds that the use of cash for day-to-day transactions continues to decline. Although the acceptance of cash by merchants remains at a high level, it is a little lower than prior to the pandemic. Nevertheless, some communities, particularly in rural areas, are increasingly susceptible to a decline in cash access if there were to be further removal of cash access points. Furthermore, many merchants indicated plans to discourage cash payments at some point in the future.

"The digitisation of payment instruments increases the number of people in a situation of monetary exclusion. Digital payments have now become essential to fully participate in socio-economic activity, although they are not necessarily accessible by all."

The IMF published a paper that analyzes cash usage in 14 advanced and emerging market economies, using two measures; currency in circulation (CIC) and the value of cash withdrawn from ATMs. It finds that, while the CIC metric continues to rise, ATM withdrawals are declining rapidly. The main reason for this is that CIC includes cash used for payments, hoarding, and illegal use while ATM cash is focused much more on the use of cash for payments alone. As well, CIC is not adjusted for the turnover of cash for payments while ATM cash already includes it. The 14 countries in our sample account for half of the world’s population and two-thirds of its GDP.

As further evidence of how flakey the "legal tender" concept is, this article documents the great difficulties the author had in paying his income tax in cash to the U.S. Internal revenue Service (IRS). It highlights some of the challenges faced by Americans without bank accounts, likely among the poorest taxpayers, who would either have to follow the arduous process followed by the article's author, or pay fees for various end-arounds.

Congress members introduced legislation in the House and Senate to ban businesses from rejecting cash for in-person retail purchases. They are designed to protect Americans who are unbanked and underbanked and who rely on cash to pay for necessities, as well as to preserve the right of consumers to choose to pay with cash, say the bills’ authors. “Cash is the only option available for millions of Americans to pay for food, housing and other essentials,” Payne said in a June 14 press release regarding the introduction of the Payment Choice Act.

The Bank of Canada (BoC) published a paper that finds that most adult Canadians do not experience gaps in their access to a range of payment methods, and this would probably continue to be the case in a cashless environment. Some people could, however, face difficulties making payments if merchants no longer generally accepted cash. It suggests that addressing unmet payment needs for a minority of consumers by issuing a central bank digital currency (CBDC) could be challenging, because the minority of consumers with unmet payment needs will only be able to benefit from a CBDC if the majority of consumers experience material benefits and therefore drive its use.

De Nederlandsche Bank (DNB) published a paper about the payment behavior and preferences of Dutch consumers who encounter difficulties navigating this digital world, particularly individuals within groups at risk.  The research focused on people with low digital literacy, disabilities or financial difficulties. Using rich payment diary data it revealed that cash is an important means of payment to many. 7% said they always use cash at points of sale and 28% indicate they cannot do without cash. Cash is especially important for people with low digital literacy, people who are blind or visually impaired, people with limited or no hand function, people with a mild intellectual disability and people who find it difficult to make ends meet on their income.

"America is an odd place when it comes to payments. It seems incredible to me that there is a business case to be built around taking cash and converting into cards at a ball park, but there you go. Interestingly, one of the providers of reverse ATMs in America speculated that in the future there might be no need to dispense a physical card from the machines, instead offering customers “a virtual card on your smartphone”, much as they did in Russia all those years ago!" [David Birch]

"Within the extant literature, recommendations are for government policy to “invest more in nudging”, that is, to use psychological behavior and habits to influence, for instance, greater use of electronic payment methods or eliminate cash transactions. However, most people in our sample declared no preferred payment method. Instead, they choose according to transaction context in specific situations. These results suggest that authorities should ensure that a wide variety of payment alternatives is available for people to use, including cash, and let them choose. This option is aligned with the position of the leading central banks and the Bank of International Settlements’ recent joint proposal to launch CBDCs shortly. These recommendations thus support a view to managing the downsizing but not the total elimination of the cash management infrastructure."

According to Payments Canada, while the value of cash used in purchases has declined 41% from 2017-2022, only 13% of Canadians report having gone completely cashless. Of the 87% that still use cash, 31% use cash for day-to-day purchases, and 37% hold on to it for emergencies. While cash is used less often for point-of-sale purchases, the prospect of cashless stores is a concern for 52% of Canadians. And they are divided on the prospects of a central bank digital currency (CBDC), 36% finding it appealing and 30% not. One in four say they would not use a digital Canadian dollar, with 63% who would still use cash if a digital Canadian dollar was introduced.

"The 2022 Federal Reserve Payments Study (FRPS) collected data for the 2021 calendar year. This initial release includes top-line figures for the core noncash payment methods used in the United States by consumers, businesses, and governments, including payments by general-purpose and private-label cards, automated clearinghouse (ACH) transfers, and checks. This release also covers automated teller machine (ATM) cash withdrawals. Wire transfers, used primarily for large financial transactions, are excluded from these data."

"In 2022, Dutch people used their mobile phone or wearable device for contactless payment at points of sale as often as they paid in cash. The share of these new means of payment rose to 21%, while the use of banknotes and coins stabilised at 20% of total payments. Including the contactless variants, debit payments thus stabilised at 80% of all purchases. Young people, the over-65s and people who find it difficult to make ends meet still tend to prefer cash. This has been revealed by a joint study conducted by the Dutch Payments Association (Betaalvereniging Nederland) and De Nederlandsche Bank (DNB)."

The U.K. Financial Conduct Authority (FCA) proposed new rules to maintain reasonable access to cash for personal and business customers across the United Kingdom. Under the proposals, designated banks and building societies will need to assess gaps in access to cash. These assessments need to take into account local factors such as demographics and transport. Where firms identify gaps, they will need to act to address these needs, like delivering reasonable additional cash services to fill gaps, and ensuring they do not close cash facilities, including bank branches, until any additional cash services identified are available.

According to a BearingPoint survey across seven European countries, cash is the most used payment method overall with contactless debit cards second. Cash use is significantly higher in Austria (79%) and Germany (71%), but respondents from Switzerland (63%), Ireland (61%), the Netherlands (57%), and France (55%) also show a relatively high level of cash use. Finland has a significantly lower frequency of cash usage at 43%.

"While proponents of central bank digital currencies argue that the technology would boost financial inclusion and efficiency, critics warn that it poses financial, political, and environmental risks. But these concerns are overblown, especially when also weighed against CBDCs’ potential to strengthen monetary policy."