The authors Jashim Khan (University of Surrey, UK) and Russel Belk (York University, Toronto) conclude “when we handle cashMoney in physical form such as banknotes and coins. More, we are not just spending moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More; we are parting with a pieceIn plural, it is commonly used as synonym for units of banknotes and coins. More of ourselves.” The paperSee Banknote paper. More published in Qualitative Market Research, shows that cash not only influences how much we spend but also fosters a profound sense of psychological ownership that digital payments do not replicate.
As the world increasingly adopts digital paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More systems, the reliance on cash has significantly decreased. However, this transition risks overlooking the essential role that cash plays in monetary systems and society. While digital payments offer unparalleled convenience, the resilience, accessibility, and privacy provided by cash make it an irreplaceable pillar of economic stability.
Cash is uniquely inclusive. It requires no technological infrastructure, making it accessible to all individuals, including those in rural areas, the elderly, and people without access to banking services. In many parts of the world, cash remains the primary medium of exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More, ensuring that economic participation is not limited by digital divides.
In emergencies, natural disasters, or technological disruptions, cash acts as a fail-safe. Digital payment systems depend on electricity and internet connectivity, both of which can be compromised. During power outages or network failures, cash ensures uninterrupted commerce, providing a reliable means for purchasing essential goods and services.
Digital transactions leave a traceable footprint, raising concerns about data privacy and surveillance. Cash transactions, on the other hand, provide a level of anonymity, empowering individuals to conduct their affairs without external scrutiny. This attribute is especially critical in safeguarding personal freedoms in an era of increasing digital surveillance.
A healthy mix of cash and digital payments strengthens economic stability. By maintaining cash circulation, central banks ensure liquidityDescribes the extent to which assets or rights can be converted into cash without causing a significant decrease in the asset’s price. Accordingly, liquidity is often inversely proportional to the profitability of the asset and involves the trade-off between the selling price and the time needed to convert it to cash. In finance, cash is considered the most liquid asset and cash is sometimes used as a synonym for liquidity (e.g. cash reserves; cash pooling…). More and mitigate risks tied to overreliance on digital systems, such as cybersecurity threats and system outages.
Maintaining cash as part of the payment system may be vital for promoting responsible spending behaviours. Cash promotes heightened awareness of spending, while cards and apps often lead to a disconnection from the money being spent.
“When we handle cash, we are not just spending money; we are parting with a piece of ourselves.”
Dr Jashim Khan, University of Surrey
The paper adds to growing economic literature demonstrating the importance of cash in encouraging more responsible and sustainable spending:
Advancements in digital payment technology should not come at the expense of cash. Policymakers, financial institutions, and consumers must recognize the role of cash as a foundational element of a robust, inclusive and sustainable economy. Efforts to preserve and support the use of cash, such as maintaining ATM networks and accepting cash payments, are vital for a balanced monetary ecosystem.