Julia Pitters and Franz Seitz have published a paperSee Banknote paper. More titled “Beyond the cost debate: A multidimensional approach to quantify the value of cash for society“
The paper examines the value of cashMoney in physical form such as banknotes and coins. More to society in an increasingly digital economy and develops a framework to quantify that value. It argues that cash provides important benefits beyond its role as a payment instrumentDevice, tool, procedure or system used to make a transaction or settle a debt. More, particularly in the areas of resilience, privacy, inclusion, financial self-control, and competition. Using representative survey data from Germany on these topics, expert interviews from cash cycleRepresents the various stages of the lifecycle of cash, from issuance by the central bank, circulation in the economy, to destruction by the central bank. More stakeholders, macro data, and estimates of consumer surplus, the authors calculate that the total societal value of cash amounts to approximately 1.2% of German GDP, significantly exceeding its estimated societal costs.
One central argument is that cash serves as a critical resilience infrastructure. Modern digital paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More systems depend on a complex network of electricity, telecommunications, banking systems, cloud services, and cybersecurity. Disruptions in any of these components can interrupt payment services. Cash, by contrast, functions offline and allows transactions to continue. Recent events and research support this perspective. The authors emphasize that cash is not intended to replace digital payments during long-term crises. Rather, it serves as a backup mechanism that helps households continue purchasing essentials such as food, fuel, and medicine during temporary disruptions. By providing a reliable fallback option in case people have enough cash at home, cash enhances public confidence and reduces panic during emergencies. The authors’ estimate is that just over 0.4% of GDP are due to this factor in Germany.
The second major topic concerns privacy. The paper argues that privacy is not merely a personal preference but an important economic and political attribute of exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More. Digital payments create detailed data trails that can reveal highly sensitive information, including health conditions, political opinions, religious activities, spending habits, and financial difficulties.
Although regulations provide safeguards, digital payments generally require and imply data collection. Cash is unique because it enables transactions without generating a commercial data record. Privacy and anonymity are viewed by many as the most important advantages of cash and therefore consumers are willing to pay to prevent payment data from being stored or shared.
The authors discuss research attempting to assign a monetary value to privacy. Based on the German survey results and previous studies, the paper estimates a privacy value equivalent to approximately 0.07% of GDP.
Another important function of cash is promoting financial and especially payments inclusion. While many discussions of inclusion focus on access to bank accounts, the authors note that having a bank account does not automatically guarantee effective access to digital payments. Older individuals, people with disabilities, low-income households, migrants, tourists, minors, and those with limited digital literacy may face barriers when using digital payment technologies. Cash remains accessible because it can be used immediately, requires no technology, and does not depend on bank-account ownership at the point of sale.
Although the study’s monetary estimate of inclusion benefits in the case of Germany is relatively small (about 0.001% of GDP), the authors stress that this is a deliberately conservative measure. It excludes many broader benefits such as avoiding costs associated with digital devices, internet access, technical support, and digital skills training.
The paper also draws on behavioral economics to explain how cash influences spending behavior. According to the concept of “mental accounting,” people experience the act of spending cash more directly than card or digital payments. This creates a stronger “pain of paying,” making expenditures more salient and easier to monitor. Numerous studies suggest that consumers tend to spend more when using credit cards or other cashless payment methods. Digital payments reduce the immediate psychological impact of handing over 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, thereby increasing the likelihood of impulse purchases and overspending. Survey results indicate that younger people, in particular, expect to spend significantly more if all transactions had to be conducted digitally. Consequently, the authors argue that cash functions as a self-control mechanism, especially for individuals facing debt risks or financial constraints. Cash may therefore help reduce over-indebtedness and improve household budget management.
The paper also highlights social and local economy oriented aspects of cash use. Small donations, tipping, informal neighborhood services, and local market transactions often occur spontaneously and are facilitated by physical cash. Evidence suggests that these activities may decline in fully cashless environments because digital alternatives introduce additional technological and emotional barriers. Taken together, these two value factors contribute around 0.45% of GDP.
A final benefit of cash the paper is concentrating on is its role in maintaining competition within payment markets. Cash provides a publicly available alternative to private payment providers such as card networks and digital platforms. Economic research suggests that this alternative constrains the market power of payment intermediaries and limits their ability to raise fees. If cash disappears more and more, merchants and consumers might become increasingly dependent on dominant payment providers. This could result in higher transaction fees, stronger network effects, and reduced competition. The study estimates that this “fee-control” value of cash contributes approximately 0.02% of GDP.
The paper develops a conceptual framework and constructs a cash value indicator that groups the societal value of cash into the above mentioned dimensions. In addition, the authors incorporate consumer surpluswhich is the difference between the money services cash delivers and the amount, cash holders have to pay, i.e. their opportunity costs (or, equivalently, the seigniorage revenues). The study estimates that cash contributes a total gross value of approximately 1.2% of GDP.
Interviews with representatives from central banking, retail, cybersecurity, consumer protection, financial services, and civil society largely supports the study’s findings. Strongest agreement emerges regarding resilience, privacy, and spending-control of cash. Experts consistently describe cash as the only payment methodSee Payment instrument. More that remains immediately functional during blackouts or major system failures and emphasize its importance for preserving anonymity and consumer choice.
The authors conclude that cash should be understood not merely as a payment instrument but as a form of public infrastructure. They argue that policymakers and central banks should evaluate cash not only in terms of costs but also in terms of its broader societal benefits. As digital payments continue to expand, maintaining both access to and acceptance of cash remains important for resilience, privacy, inclusion, competition, and overall public welfare. According to the study, even under conservative assumptions, the benefits of cash for society substantially outweigh its costs. It forms the basis of a more comprehensive cost-benefit-analysis from a society’s perspective. The paper advocates for a payment mix consisting of digital payment methods and, necessarily, cash as well.
The study uses Germany as a pilot. The idea is to extend the analysis to other countries worldwide in a consistent way and to supplement the economic indicator with a psychological index which tries to capture the individual perception of cash.