Despite the proliferation of new payment instruments, such as mobile banking apps or e-currencies, the demand for cash remains strong in various countries, but especially in the UK. Indeed, the value of pounds in circulation increased by 10% in 2016 to a total of £70 billion, the highest amount ever reached.
Victoria Cleland – Director for banknotes and Chief cashier of the Bank of England (BOE) – stated that the demand for banknotes has increased in the majority of countries, demonstrating that banknotes remain crucial for a great number of consumers. During an event celebrating the 50th anniversary of the first cash machine, she affirmed that cash has a bright future, and encouraged the banknote industry to continue innovating.
In the UK, cash accounted for 45% of transactions in 2016, but the share is more significant in other regions of the world. In Japan, for instance, 81% of payments are made with cash and 67% in Australia. Cash is usually preferred over digital payments because it helps people keep control over their finances. In addition, cash can be used at any time anywhere, including in case of a system failure. Finally, many retailers refuse card payments because of the transaction fees. A study conducted in 2015 by the British Retail Consortium demonstrated that the average processing cost for cash payments was 0.15% of the transaction, compared to 0.79% for credit cards.
It seems that Andy Haldane – Chief economist at the BOE – has been too quick off the mark when he proposed to abolish paper money and replace it with a government-backed digital currency in 2015. Haldane advocates for the demise of cash to help the bank manage inflation and impose negative interest rates. Nevertheless, figures suggest that cash remains the most widely used payment instrument worldwide.
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