Cash demand

Despite digital payment advancements, cash remains essential for many globally, preferred even where its use is minimal. It serves as a precaution, store of value, and is crucial during crises.

Elsewhere on the Web provides updates and links to articles related to cash, money and payments curated on the web. This month, Bulgaria and Mozambique see cash in circulation increase whereas the in UK cash usage rebounds as shoppers use it to help them budget. India is halting its move towards a cashless society to embrace financial inclusion for all.

The Chinese New Year, celebrated globally, is marked by the tradition of giving red envelopes filled with money, symbolizing good luck and prosperity. This custom leads to a significant surge in cash demand, prompting financial institutions to implement innovative solutions to distribute the red envelopes. The fusion of tradition with modern banking practices highlights the dynamic nature of this cultural celebration.

Domestic ATM cash withdrawals are subject to interchange fees, which are designed to compensate ATM deployers for operational costs. These fees have remained largely unchanged for years, in spite of rising operational costs. This divergence poses a threat to the sustainability of ATM networks.

After exceptional growth during the Covid-19 pandemic, global cash demand was negatively impacted by the return of inflation in 2022. Early figures for 2024, indicate that demand is picking up. As central banks vigorously tackle inflation, the precautionary demand for banknotes in the increasingly uncertain world will likely grow. .

For the first time in a decade, U.K. cash payments at the point of sale have increased as consumers turn to cash to better manage their budget during the cost-of-living crisis.

A recent IMF paper suggests that ATM cash withdrawals are better indicators of the use of cash for payments than the traditional metric of currency in circulation. However, the reasoning is somewhat biased and includes unconvincing arguments.

A comprehensive review of economic research on cash usage and consumer holdings concludes cash is alive and well.

After record growth in 2020, global demand for banknotes has returned to a normal situation. More recently, rising inflation and increasing interest rates have been negatively impacting cash balances. More concerning is the decreasing transactional use of cash, which puts pressure on the cash infrastructure. The cash community should make the case that cash is part of a critical public infrastructure, the maintenance and development of which should be financed accordingly.

In 2021, global cash demand returned to a normal pre-covid distribution, which is quite remarkable after the exceptional growth in 2020. Looking forward, demand will be influenced negatively by rising interest rates and positively by geopolitical tensions. More than ever, a well-functioning cash infrastructure is essential to meet volatile demand.

Following exceptional growth in 2020, cash demand has returned to 'normal' growth in 2021. Looking forward, the rapidly rising interest will increase the opportunity cost of holding cash, while geopolitical tensions will increase the precautionary motive to keep cash.

Elsewhere on the Web provides weekly updates and links to articles related to cash and money, curated on the web. Last week, the focus was on how the Ukraine war triggered a run on cash in neighbouring countries.